HB 



X^(> SCIENCE OF VALUE 

A Cash Market 



A MARKET WHERE ALL PROPERTY. EXCEPT LAND, WILL SELL FOR ITS 
VALUE IN MONEY ON DEMAND AT A STANDARD PRICE 
OF TWICE THE LABOR COST 



A MARKET WHERE THE WAGES OF LABOR WILL BUY BACK ITS ENTIRE 

PRODUCT AT TWICE ITS LABOR COST. LEAVING 

ROOM FOR PROFIT TO CAPITAL 



A MARKET WHERE LABOR WILL NOT COMPETE WITH LABOR AND REDUCE 
WAGES BELOW THE HIGHEST RATE THE MARKET CAN PAY 



A MARKET WHERE GOODS WILL NOT COMPETE WITH GOODS AND REDUCE 
THE NATURAL RATE OF PROFIT UPON CAPITAL 



A MARKET IN WHICH DEBTS WILL BE CHANGED INTO CREDITS PAYABLE ON 

DEMAND AND WHERE THE BILLIONS OF DOLLARS. DEBTS 

NOW VAINLY PROMISE TO PAY IN THE FUTURE, 

WILL BE RESTORED TO THE PRESENT 

BUSINESS OF THE COUNTRY 



A MARKET WHERE PROFIT WILL NOT TAKE A PENNY FROM LABOR. BUT 
WILL CONSIST OF MONEY COMING FROM INHERITED WEALTH 
CREATED BY THE LABOR OF THE PAST, AND WILL BE 
USED TO CHANGE THIS WEALTH TO NEW OWNERS 
AND DESTROY THE PRESENT CONCEN- 
TRATION OF THAT WEALTH 



PRICE TWENTY-FIVE CENTS 



HENRY RAWIE 

1947 BROADWAY 

NEW YORK CITY 



SCIENCE OF VALUE 



A CASH MARKET 

by HENRY RAWIE 






^^ 



Copyright secured by Henry Rawie 1915 



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(Q)CI,.A398178 



TABLE OF CONTENTS 

PAGE 

CHAPTER I 
Light 5 

CHAPTER II 
The Quantity of Money 12 

CHAPTER III 
Labor 24 

CHAPTER IV 
Prices Above Cost 27 

CHAPTER V 
Past Labor Money 33 

CHAPTER VI 
The Elasticity of the Currency 40 

CHAPTER VII 
The Value of Land 47 

CHAPTER VIII 
Competition 53 

CHAPTER IX 
Income 56 

CHAPTER X 
Capital 60 

CHAPTER XI 
Banking 69 

CHAPTER XII 
Wages 73 



CHAPTER I 
LIGHT 

ALONG time ago, in far away China, a magician, dis- 
guised as a beggar, went about the streets of the 
city crying "old lamps for new, old lamps for new, 
who will trade an old lamp for a new one?" 

The people who heard him, said "Who does this fool think 
we are, to be so easily taken in by his cry 'old lamps for new' 
no one could afford to do that, he must be a cheat." The dis- 
guised magician came to the palace of Aladdin, who was in the 
country hunting. You will remember Aladdin was the shiftless 
and lazy son of a poor tailor Mustapha, who became possessed 
of a magic ring, and calling up the genie of the ring was given 
an old lamp. This lamp had the power to grant every wish 
of Aladdin that money would buy, and he soon became the 
most important man in the city, married the princess and lived 
in a palace. 

When the old magician came to the court yard of the 
palace, and the princess being told he was offering to trade new 
lamps for old ones, she gave him Aladdin's wonderful old lamp 
for a new one, and then the magician was able to take the 
palace and princess from the city before Aladdin returned from 
the hunt. But Aladdin having the magic ring called up the 
genie of the ring and discovered where his princess and his 
palace had been taken, and was soon in possession of his lamp, 
his palace and his princess again. 

I am going about the highways and byways of the city to 
again test the people, who have old lamps crying "new lamps 
for old, who will trade an old lamp for a new one?" This new 
lamp has the magic power to grant every wish money can sat- 



6 SCIENCE OF VALUE 

isfy, but the lamp is also controlled by the genie of a magic ring. 

The genie of the magic ring has power over a great sum of 
money, billions of dollars, not in use, and it is this money the 
new lamp will supply to gratify your every wish; it is not money 
now in use, but is new money to do new buying that only the 
cash market can bring to you. 

I have no use for the old lamps. I only wish the people to 
discard them and see the light from the new one, and let the 
old ones go below to the melting pot where they may suffer for 
the sin of so long keeping the world in darkness respecting this 
wonderful amount of new money. 

The new lamp is called A Cash Market. You make your 
wish for what the market can supply and rub the lamp in the 
right way as Aladdin was required to do. The money will 
appear to grant your wish, as with Aladdin. 

The first instruction to go with each lamp is to rub it in 
the right way, and by so doing, wipe out all the debts upon 
property, billions and billions of dollars of them. As soon as 
these debts disappear the genie of the magic ring will come, 
bringing the money that debts have held out of use and promise 
to return in the future. 

The wise men who will not trade the old lamps for the new 
ones will say: "We have heard this same talk about returning 
the billions of dollars, debt has taken, getting this money the 
same as cash is all bosh. This lamp will call up an evil genie 
who will repudiate our debts, and make us forget our solemn 
obligations." 

By no manner or means will debts be repudiated; the 
creditor is not to lose a penny. On the contrary he is to be 
paid on the nail, and that is where we get advantage of him — 
by being able to pay on demand. The new lamp will enable 
every property to secure its value in money and pay its debts. 
The creditor will not want his money when he finds that it can 
be had on demand, but will gladly take a better security than 
the one he now holds. Each and every property will be worth 



LIGHT 7 

its value in money because each will be required to insure this 
value, and all working together will supply the money to pay 
as fast as it will be called for. This insurance of the value of 
the property will be based upon its income, which means upon 
its time to live, the same as life insurance, and the money will 
be paid the same as bank deposits are paid, by having a reserve 
set aside for this insurance fund. 

To thus insure over a hundred billion dollars' worth of 
property, means that the value of land must be cut out because 
such value cannot be insured, and it is only necessary to make 
a very simple change in the book keeping of banks to supply 
the required reserves. 

The deposit accounts of banks will merely change from 
one side of the bank ledger to the other side. One-third of the 
total deposits will only be required to make this change. All 
other deposits will be released to increase the general circula- 
tion of money. This reserve being used to convert the value 
of property into money on demand. 

The whole stock of money in the United States consists of 
about three and a half billion dollars in cash, and more than 
eighteen billion dollars in bank credit, payable in cash on 
demand. This deposit money is supposed to supply an un- 
limited elasticity to the currency by which all possible demands 
from the market will be supplied, and every sale may have a 
margin of profit. 

To be thus able to use five times as much credit money as 
we have cash it has been necessary to set aside one half the 
cash to pay this credit on demand, and when we fail to get the 
benefit of credit in an elastic currency we also lose the use of 
half the total cash. 

For reasons, to be hereafter explained, the elasticity of 
bank deposit credit — by which it performs all the work of cash 
— has become a total failure so far as supplying capital with its 
money is concerned. We only use about four billion out of a 
total of eighteen billion, and this four billion must be cancelled 



8 SCIENCE OF VALUE 

in cash as fast as it is being used, and becomes a substitute for 
the cash held in reserve. 

We have an enormous total of more than a hundred billion 
dollars worth of capital that should be liquid, exchangeable for 
money on demand, and the failure to make this capital liquid 
forces it to depend upon a speculative market when it seeks 
to sell, and makes it subject to violent changes in its price from 
which enormous fortunes have been taken. 

The lack of an elastic currency, for the benefit of the 
security market, makes the innocent suffer with the guilty in 
creating fraudulent capital, and a fall in prices occurs when 
these frauds must be liquidated. All prices suffer as a result, 
and wealth concentrates to a small creditor class who buy in 
bankrupt property at half its true value. 

The next question is — Can banks spare six billion dollars 
from the investment side of their accounts and transfer the 
deposits to the reserve side? We must remember, in this con- 
nection, that a cash market is the only market nature permits, 
and that bankers as well as all others finally depend upon the 
extent of the market, and this plan greatly extends the cash 
market for the general benefit. 

If the general market is to be so extended, that it will be 
able to sell all that labor can send, and sell it at a profitable 
price, the billions of dollars now idle and invested by banks as 
capital must become liquid and instead of representing only six 
billion dollars in capital must make a hundred billion dollars 
worth payable on demand, and instead of all capital being 
deprived of its natural market, it then can be sold on demand 
at a standard price determined for it by its own rate of interest 
or dividend. 

That capital may sell for its value in money on demand 
each corporation must set aside a bank reserve equal to one 
year's rate of interest on its whole issue of securities outstanding, 
this reserve will then create a market for its own securities in 
buying and selling them. The great gain to capital will come 



LIGHT 9 

by allowing it to do its own financing, to be able to sell its own 
securities by competing with banks on equal terms for the 
money of depositors, paying the security on demand the same 
as the bank promises to pay its deposits on demand. 

Each corporation will be required to call in and cancel its 
polyglot assortment of cat and dog securities, and replace them 
with a new issue in which there is no underground or concealed 
passages to defraud the public, and the only limit to the quan- 
tity of securities will be the amount the company can maintain 
on a cash basis. The reserve to protect capital will be in the 
hands of a trustee, who will redeem the securities to the extent 
of the reserve, and as fast as he redeems them will again sell to 
the public to replenish the reserve, thus making a market for 
securities, and taking the market from present stock exchanges. 
All changes in price will then be abolished and there need be no 
exchange in which to make prices. 

When the demand for money in redeeming securities 
exceeds the supply, and the trustee can not sell as fast as he 
must redeem, the capital of such corporation will be thus re- 
duced automatically until it meets its demand, and the corpora- 
tion must make good its reserve at the expense of its dividends. 

On the other hand, if the corporation is accumulating a 
surplus, which it does not need for its own development, it may 
automatically increase its capital to the full amount it can sus- 
tain in a cash market by paying stock dividends. 

This first glimmer of light from the new lamp, being an 
unaccustomed light, may appear a bit hazy, but other rays will 
be forthcoming to illuminate this part of the subject as well as 
other parts connected with it. Remember the magic lamp 
and the magic ring is to make a mere change of debts into 
credits payable on demand, to merely change the accounts on 
the books of banks so that one-third of the total deposits will 
change from being invested as capital into a reserve that will 
make all capital payable in money on demand. 

A cash market means a market in which no unsold goods 



10 SCIENCE OF VALUE 

will accumulate because no buyers may be found at a profitable 
price, not only will this market take up present supplies, but it 
will take all that labor and capital can send, at the same margin 
of profit. 

This margin of profit is expected to create such a demand 
for labor to produce the goods and capital as to send wages to 
the highest point the market can pay, which point will be 
reached when wages equal the selling price of its product and 
includes the money taken from labor in profit. 

This is, beyond doubt an unheard of market, a very 
Aladdin's market, where everything will be sold at a profit 
except property in land, which can not maintain a price payable 
in money. The money now spent for land and the debts that 
have kept this money out of circulation will then be used to buy 
the surplus of labor and capital. 

It will be a very remarkable market, without competition 
between laborers reducing wages, and without competition 
between sellers reducing the standard rate of profit — a market 
in which the greatest anxiety will be found in getting labor to 
increase the supply that may always bring its profit, with no 
cost of land to pay, money will accumulate so fast from profits 
that every one will have plenty of it, and nothing to spend it 
for but the products of labor and capital. 

Such a market means an enormous increase in spending 
money in the hands of about forty million laborers, and will 
advance the wage rate from the present lowest level that the 
least aniount of money in the market will pay, ten dollars a 
week, to the highest level the most amount of money can pay, 
forty dollars a week. 

The cash market will have no trouble in maintaining the 
high wage rate for we already know that the higher wages go 
the easier they are to pay on account of the increase in profit 
money they carry, and we know that wage money circulates 
very rapidly, turning over six times a year. If you would see 
how easily bank deposit money may give rise to an elastic 



LIGHT 11 

currency — employing labor, and building up an industry — the 
rapid development of the automobile business will supply the 
most fitting example. This business absorbed about five 
hundred million dollars of new capital in about ten years, by 
using bank deposits and converting them into cash in building 
factories, buying material and employing labor. 

An automobile is a form of capital rather than a consumable 
commodity, altho it is rapidly consumed. Being a form of 
capital, its money must come from sales to owners of bank 
deposits rather than from sales of cash paid to labor. By selling 
machines to owners of bank deposits the currency became so 
elastic as to not only supply this business with all the money it 
could use, but it developed new profits that more than replaced 
the deposits, besides building up the new business as a total 
gain. 

The cash market will extend this process of making an 
elastic currency by adding about thirty million new bank 
accounts to the present supply, giving to each laborer a surplus 
he need not spend for his living, allowing him to become a bank 
depositor. The old lamps I am most anxious to get out of the 
way by trading new ones for them, are lamps that put this 
money question in the gloom, by claiming that the supply of 
money in banks has nothing to do with the employment of 
labor, or with the increase in wealth, while the truth is clear 
that money has everything to do with success in business, and 
profit money is most vital to every undertaking. The real 
issue is between Cause and Effect. Our failure in solving social 
problems comes wholly from treating effect as cause. 



CHAPTER II 
THE QUANTITY OF MONEY 

IF money is the Cause of activity in business the quantity of 
it becomes very important, and if the amount of business 
we may do is limited by having a cash market, the greater 
this market the greater must be the quantity of money, in 
circulation. In taking up this very complicated question of 
quantity we will limit it at first to the quantity in the commodity 
market where we do practically a cash business, and where we 
may easily see the amount of money we use and find it to be 
about sixty million dollars a day, and for the time forget that 
we should be using a like sum each day in the security 
market. 

We pay out in wages of every description each day the 
sum of sixty million dollars, and we collect the same amount 
every day from the expenses of laborers and their families. 
This is the limit in quantity of cash, it carries profits, but these 
profits are also paid in wages so that this one sum includes all 
the actual money in use. We do circulate other money in 
buying or making exchanges between property owners, selling 
one property to buy another to adjust values to changing 
conditions, but this does not add to or take from the total 
quantity. 

The sum of sixty million dollars paid in wages each day, 
must be balanced by collecting sixty million dollars the same 
day from consumers of every kind so the supply will balance 
the demand. We use the same money over and over again, 
and there is little trouble in following this circulation, while the 
trouble of following the circulation of credit is much more 
complicated. 

12 



THE QUANTITY OF MONEY 13 

A child should be able to see that we have no unlimited 
source of money to draw from, and are compelled to use the 
same cash over and over again. This limit in the quantity- 
fixes an absolute limit in the amount of business if we have no 
elastic currency to increase the limit. 

Let the ones who claim the quantity of money has nothing 
to do with our ability to employ labor or sell goods, consider 
the effect of reducing the total quantity of more than three 
billion dollars to the sum of sixty million we use each day, for, 
if we collect as much each day as we pay each day, why do we 
need more than one day's supply? Here is the point calling 
for new light. 

We cannot get along with only one day's supply of cash on 
account of the different paths which the money takes after it 
is paid to labor, and when it returns from the consumer, each 
day's supply paid to labor must travel to the far ends of the 
earth and return before it may be used over again, and, while 
it is making this journey, we must have a quantity to draw 
upon day after day, until the first day's supply returns, that 
quantity will then allow us to collect the same amount every 
day by having a dollar in store at any place we need to pay a 
dollar in wages, and at any place we can sell a dollar's worth of 
goods. 

If our supply was limited to the wages of one day only, it 
must have sixty days to return and only one million of the sixty 
would return each day and goods could only be sold to this 
amount, the owners of goods would then be compelled to 
return to barter where each man carried his own stock and took 
it bodily to a central market where it was traded bodily with 
another man. 

But when a supply of money is being paid out, while 
stocks of goods are accumulating, the value of the goods, and 
the wages of the labor producing them is being carried by the 
quantity of money with benefit to all and at no cost. The em- 
ployer of labor can pay from this stock of money before he sells 



14 SCIENCE OF VALUE 

the goods, and the merchant can sell his stock from the same 
supply before paying for it. 

Being able to pay spot cash comes from having a stock of 
money on hand that balances the wages of labor paid for pro- 
ducing it. This is what limits the market to a cash basis. We 
can have no greater market than the wages of labor, and if the 
elasticity of money will not increase wages beyond this cash 
supply, our cash market will be limited by it, and all buying, 
not done with cash, must create debts. 

The distribution of money throughout the body politic, 
along with the distribution of goods by which money and goods 
are instantly converted into each other, is the same as the 
distribution of living corpuscles throughout the blood by which 
every part of the body is nourished. We daily manufacture 
the supply of blood from the food just as we daily manufacture 
the commodity supply, and like commodities the blood goes to 
the heart and is then sent to all parts of the body to be con- 
sumed. The living corpuscles in the blood do the work of 
laborers who have money to spend, for it is these workers in 
the blood who apportion it to each part of our bodies. 

This quantity of blood, and of living corpuscles with which 
it is filled, is like the stores of goods on hand combined with the 
quantity of money to balance goods, so as to make instant 
exchanges. We cannot depend on a supply of blood to only 
fill the heart because we only need a heart full to pump at any 
one pulsation, so we must have on hand more than one day's 
supply of goods and money. 

The supply of blood the heart pumps into the arteries at 
one pulsation, and the supply the heart exhausts from the veins 
at the same pulsation, depends upon having the veins and arter- 
ies full of blood, and upon a new supply being manufactured 
every day from the stomach to replace the amount consumed, 
the same being true with goods and building material. 

The food taken into the stomach is being rapidly digested, 
which only means to us that it is being converted into a liquid 



THE QUANTITY OF MONEY 16 

from which the living workers, in the arteries surrounding the 
digestive tract, manufacture our blood. The digestive tract 
containing this liquid blood food is walled off from the channels 
in which the blood circulates so that no part of this digested 
food, not intended for blood, shall get into the system, but 
must pass out in the sewer of the body. Surrounding the walls 
of this digestive tract will be found a fine network of blood 
vessels from which the corpuscles are at work manufacturing 
blood which then goes to the heart to be pumped into its chan- 
nels in the body. 

After the supply of blood reaches the heart it has a long 
way to travel, leaving the heart in great channels which grow 
more numerous as they subdivide, finally branching out into 
millions of hair like tubes on the surface of the body. At this 
limit, in the outward journey, the tiny network of arteries is 
exactly balanced by similar network of veins into which it 
discharges its blood on its return to the heart. 

The living corpuscles in the blood are like the living labor- 
ers who have money to spend, and are profitably employed. 
These laborers make up the whole activity of the body politic 
the same as the corpuscles in the blood and tissues make up the 
whole activity of our life. 

The fact that the government may arbitrarily coin the 
primary money, and must so coin it to establish equal units of 
value in dollars, dimes and cents, makes such money appear 
to be artificial when, in fact, it is a natural evolution and controls 
all process of production and trade. The government has no 
power over the value of money itself, and no real power over 
its quantity which is determined by the cost of labor, no power 
over its circulation, nor over its functions in making prices and 
wages, which rise and fall according to natural laws. As 
limited as is this power of coinage, the government has even 
less power over credit money, the functions of which are more 
important than cash; for credit supplies the business of the 
world with fi\5e times as much money as cash, and without it 



16 SCIENCE OF VALUE 

profits could not arise and business must perish. To make the 
distinction clear between coinage and credit— suppose we begin 
with no money and coin sixty million dollars a day to pay the 
prevailing rate of wages of every description? After the first 
sixty million dollars gets into the hands of labor it will scatter 
all over the world, and we must keep on coining money at this 
rate, if we would continue to employ labor, until we saturate 
the demand for cash. At the end of about sixty days we will 
find the demand for cash saturated, all its channels will be filled, 
sixty million dollars will then be spent each day to supply the 
wage money for the next day, and coinage will stop and wages 
will have fixed the limit in quantity at a certain level of prices 
for goods. It will then be evident that the cost of labor has 
fixed the quantity of money, and that the total wages spent for 
goods will also fix the level of prices for goods, or as much as is 
so spent will fix the price level, but the cost of these goods will 
fall below this level for the reason that only about half the 
quantity of money was paid to produce goods. 

But there is, an important difference between fixing the 
quantity of money and fixing its value. The cost of labor does 
not fix the value of money which may seem queer, but is true 
nevertheless and quite simple. The value of money is de- 
termined by the equal relation between the wages of labor and 
prices of its products. This relation is only to be secured in a 
cash market where wages will buy its entire product at the 
market price. The value of money depends upon an equal 
demand and supply of money, the supply being paid out as 
wages and the demand coming from the sale of the labor 
product. But how can this be interfered with? How can there 
be a greater demand for money by the sale of products than the 
supply of money paid to labor to produce them? The demand 
may include a profit above the total sum paid in wages, products 
selling for more money than was paid as cost. But where is 
this extra money to come from? It comes temporarily from 
money earned by the labor of the past, and is supplied to pay 



THE QUANTITY OF MONEY 17 

this difference between demand and supply but is then charged 
up to labor as a debt on account of labor's failure to receive 
wages that buys back its own product. 

Suppose that in newly coining a supply of cash we have 
been paying out new money for sixty days and have a quantity 
on hand of sixty times sixty million dollars, which, however, is 
balanced by stocks of goods on hand not all sold during this 
period, we have these stocks on hand and a market level of 
prices and wages depending upon sales of sixty million dollars a 
day. Now instead of a supply that fills all the channels, sup- 
pose we reduce the total to only the sixty million we spend and 
collect in one day, and cancel all other money? The result 
would be that this sixty million requiring sixty days to complete 
its journey would only return one million each day instead of 
sixty, and fifty nine million dollars' worth of goods could not be 
sold unless it was on credit, waiting for money to come in. All 
production would then adjust itself to the million a day market 
instead of the sixty million a day, and of course in such case a 
revolution must result, and a government so stupid would 
perish from the earth. This may seem absurd; if business must 
adjust itself to the quantity of money, may it not be true that 
we should be doing as much business as labor and capital may 
supply? And is it not true that our failure to do a business of 
two hundred million dollars a day instead of sixty may be found 
in the low wages we pay and collect from labor, and the fact 
that such wages will not buy all the product labor can send to 
market? 

When the market has a surplus of goods that can not 
be sold at the price level prevailing, the practice is to sell on 
credit and thus prevent a decline in prices, adjusting the market 
to the short supply of money. These debts only mean the hope 
of getting this extra money by increasing its time of returning, 
which turns out to be a vain hope. The debts, that are being 
contracted to fill a gap in a short supply of cash, arise from 
the fact that nature demands a settlement with labor in a cash 



18 SCIENCE OF VALUE 

market, and to make this settlement on a cash basis she carries 
all unsettled claims in suspense by having them carried by a 
quantity of money. Goods are all expected to move and be 
settled for by the time new goods from a new circulation of 
money takes their places on the shelves of the merchant or on 
farms. When we contract debts in the commodity market we 
soon discover the law demanding a settlement of cash about 
every sixty days and find that goods not paid for generally repre- 
sent lost money, but in the property market where credit money 
controls the situation there is a vast difference in creating debts. 

The money paid out for labor and material in building, may 
not return to the builder from rents until after fifteen or twenty 
years, and on account of this slow return the cash settlement 
with labor, for the buildings it keeps sending to market every 
year, may be indefinitely postponed, and then wages can not 
buy these buildings in a cash market. Debts may increase in 
the property market until each and every income property has 
been encumbered with all the debt it can carry, and these debts 
will then represent the money labor failed to get as wages, 
which debts had to be created to fill the gap in the short supply 
of money when the demand for the sale of buildings could find 
no money in the hands of labor to buy them. Debts keep on 
increasing in the property market until they represent half the 
value of all accumulated wealth and also represent the share of 
that wealth which should have been paid to labor in wages but 
which was denied to labor in the circulation of money. We 
keep on accumulating debts upon new wealth as long as such 
debts do not seriously interfere with the commodity market, 
and if we will realize that property debts fill up the vacancy 
made by the cost of land in its demand upon money, this inter- 
ference with the commodity market will not be hard to find. 

The difference between the supply and demand for money, 
filled in by debts, is the difference between the cost price of that 
property and a selling price fixed by its income owing to some 
advantage of its location. The cost of land keeps rising until 



THE QUANTITY OF MONEY 19 

it takes all the profit in the selling price by making the total cost 
equal the total selling price, and destroys all profit in building. 
The whole superstructure of capital falls because the labor upon 
which it depends for its income in buying goods is out of em- 
ployment and new buildings cannot be rented or sold. If we 
had the elasticity of credit currency, supplied by the profit 
from building in addition to the cash supplied by the value of 
goods, the quantity of money paid to labor would always 
balance the demand from products of labor. Capital would 
then be putting as much money into use as it was taking from 
circulation, each building would then supply the money to 
wages it was collecting by its income, and an overproduction of 
buildings would not be possible. 

When we considered the circulation of blood from the heart 
into its arteries, and the return of this blood to the heart from 
the veins, we were only taking into account the primary system 
of circulation in the body, and neglecting an equally important 
circulation in the cell structure of bone, muscle, nerve and 
tissue. The primary system in the veins and arteries is walled 
off from this secondary system like the fluid in the digestive 
tract is walled off from the same system, and only such blood as 
each organ or part of the body demands is allowed to pass 
through the walls of the arteries or veins. The primary system 
of blood in the arteries and veins is surrounded by a secondary 
system, by a fluid called lymph that does the work of blood for 
the building up and tearing down of the cell structure of the 
body, which work is accomplished by the living corpuscles in 
the lymph and in the billions of separate cells. Our principal 
cities are like the main organs of the body, the lungs, the heart, 
the liver, and kidneys, and the market all over the world per- 
forms a function like that of the heart. The building up and 
tearing down of the solid structure of our bodies is going on all 
the time by the work of a multitude of corpuscles, every cell 
decays and becomes a new cell, and every drop of blood is con- 
sumed and its place taken by a new drop. We may guess, with 



20 SCIENCE OF VALUE 

confidence, that this renewal of the blood is counted in hours or 
days when compared with years for the replacement of the whole 
bodily structure. 

This brings us, by way of illustration, to the secondary 
system of the body politic — the renewal of the food and con- 
sumable material being counted in days, while rebuilding the 
entire wealth is counted in years, to the fact that capital 
demands its separate fluid currency and its separate circulation 
which must be given a longer period of time in making its 
settlement with the primary system. This illustration of the 
secondary system in the human body is used to call your atten- 
tion to the fact that the diseases of our bodies are lodged in this 
secondary structure of muscle, bone, and nerve, or organ, that 
disease is a process by which one part of the body may contract 
a debt against the vitality of the whole body on account of some 
failure to supply that part with a balanced circulation. The 
diseases of our bodies become immediately dangerous to life 
when some interference in this secondary circulation is commu- 
nicated to the primary blood and forces some of the living cor- 
puscles from their accustomed work in the body. 

In the body politic, it must be understood, its complaints 
of hard times, of unjust wealth and unemployed labor have 
their lodgement in the capital structure creating debts upon the 
whole vitality of society. These complaints become dangerous 
to the life of the body politic when they are communicated to 
the primary wage circulation and laborers are thrown out of 
their accustomed employments. The underpaid and un- 
employed labor of the body politic is the germ of disease, as in 
the human body, and the increase in numbers of the unemployed 
or underpaid, must in time prove as fatal to it as a deadly and 
incurable disease will in time destroy an individual life. 

To carry on the illustration of the secondary system of the 
human body with that of the body politic, we find that the 
secondary credit circulation in the capital market is walled off 
from the primary cash circulation the same as in the body of an 



THE QUANTITY OF MONEY 21 

animal. Credit money is separated from cash by the walls of 
banks, by its local circulation, by having a different period of 
time to make a complete revolution in its quantity, and by 
having its own separate channels in which to move. 

This may seem a long and difficult lesson to learn from the 
first light given out by the new lamp, and the reader may resent 
the idea of considering the laborer, with money to spend, in the 
light of a human corpuscle in the body politic, held to its task by 
the insistent demands of the body instead of working according 
to its own wants. You will be disposed to say that labor is 
godlike in its conscious power, and any man may rise superior to 
his social environment, and resist its evil influence. It is not to 
be denied that a few men are superior in conscious power, 
between rather narrow limits, and may resist evil influences 
around them, but to say that all men may rise superior to de- 
grading poverty is the height of folly. Because one man may 
become a millionaire another man may also become a million- 
aire, and reasoning by false analogy all men may become 
millionaires, which reduces it to an absurdity. 

Were it not for the fact that a man may become godlike in 
his conscious power to resist what he regards as evil, there would 
be no hope for the progress of the human race, and in time no 
doubt this godlike power will be increased and belong to every 
man. But to claim that any man may now become self- 
sufficient, rise superior to poverty and all its degrading influ- 
ences, is like claiming a man may lift himself from the earth by 
pulling up on his boot straps, forgetting that the harder he pulls 
the harder his feet cling to the earth. The apparent success of 
the successful does not imply that every man may be equally 
successful, but on the contrary it implies that such partial gain 
makes it all the more difficult for the others to follow. In a 
condition of slavery any slave may secure freedom, but all 
slaves cannot become free men unless the system of slavery is 
abolished, and the same condition is true respecting the system 
of poverty that has endured since history was first written. 



22 SCIENCE OF VALUE 

A short supply of money in use — not because the quantity 
is not in existence, but because it cannot get the profits upon 
which its circulation depends — creates all the ills and diseases 
from which the body politic suffers, and no relief is possible 
unless the cause of this disease is attacked and destroyed and 
unless the elasticity of the currency is made to respond to the 
accumulation of we3,lth. 

Some interference between the primary circulation of cash 
and the secondary circulation of credit destroys the difference 
in price upon which all activity depends, and upon which all 
profit is based. This interference comes from injecting the 
value of land between the cost price and the selling price of 
capital, destroying any difference from which a profit may be 
secured in building. The complete interchange between cash 
and credit must come by restoring the higher market price for 
capital, come by preventing the cost of land from moving into 
this territory and taking up all profit by a rise in its price. This 
may be accomplished by abolishing debt in creating a cash 
market, for in such a market land cannot sustain its value in 
money. The present value of land must be then added to the 
cost of buildings and must advance the price of buildings to 
twice the cost, and restore the profit upon which all success in 
business depends. 

In placing the equal demand and supply of money above 
every other consideration, as being the cause of all industrial 
and business activity, and the cause of all failure in business, 
all other theories of finance and political economy are set aside 
as having been built upon a false premise. No matter how logi- 
cal a writer may reason from a false premise he can never arrive 
at a right conclusion, and this is the truth for every present 
theory; pretending to explain modern problems, they fail in 
explaining any of them, because they all proceed from a false 
premise upon the theory that labor is the cause of value, when 
in truth value is the cause of labor. It becomes necessary 
therefore — Shaving a new theory, treating labor as an effect of 



THE QUANTITY OF MONEY 23 

value, and as an effect of the circulation of money, to look upon 
money in a new light, to see it as the most important factor in 
our civilization — the factor upon which every step in advance 
must depend— and to consider labor from an entirely new 
standpoint. 



CHAPTER III 
LABOR 

IT is a difficult matter to bring the true standing of labor into 
the clear light, on account of the fact that its condition has 
always been a condition of virtual slavery, and low wages 
have continued for so long a time as to appear to be natural. In 
the whole scheme of the evolution of society labor is something 
apart from the individual who labors, no matter how intelligent 
he may be, and it is difficult to make this distinction clear. The 
laborer who is earning and spending money is an effect of the 
body politic, while the individual himself is the cause of all this 
activity and progress. The laborer is doing something which 
has been determined in advance he shall do for the benefit of 
the whole society, which in its turn is doing everything for the 
higher development of individual man. The laborer works 
unconsciously for the betterment of the whole human race, but 
no advance is intended to create a superman. All advance is 
intended to lift the whole race so that each individual may 
become a superman. 

In performing labor and spending the money so received, 
each person is one among countless millions of human cor- 
puscles who are born and who die in countless numbers, but the 
individual represents the mass man who is immortal and who 
does not die. Human labor, earning and spending money, is a 
force in the body politic like the life force in the human body, a 
single cell among countless millions of like cells, but the single 
individual is the ego of the whole body politic as the human 
being has its ego, aside from the activity of the living forces by 
which it moves and has its being. 

The rise of the savage to the civil man was a rise depending 

24 



LABOR 26 

wholly on outside influences, and very little upon the savage 
himself, and this rule holds good today in the rise of the success- 
ful in civil life. The rise of the whole race depends upon the 
accumulation of wealth by which the mass of laborers gain upon 
subsistence and are released from the fear of want — wealth by 
which leisure is obtained so that many may devote their lives to 
the general welfare. 

Accumulated wealth continues to be the chief reliance, not 
only for the successful individual, but for the race, and only as 
the whole people may be relieved from the struggle for existence 
will the race move forward. Labor becomes an effect instead 
of a cause by the introduction of money which takes its place as 
cause, separating labor from its means of life, and by denying to 
it any claim upon its products, and reducing its claim to a claim 
upon the money in use. 

Labor is cut off from supplying its most simple wants by 
its own labor, and is compelled to work for money to buy the 
things it wants, and in this way labor is compelled to work for 
the benefit of others in order to secure benefits for itself, the use 
of money puts the good for all in advance of the good for any, if 
we have plenty of it. 

When present theories treat labor as the cause of value and 
of money, they confine Cause to the living and active laborers, 
and omit all the labor of the past represented by accumulated 
wealth, failing in theory to consider the rights the living should 
have in the wealth which sells for money the living must earn. 

The work of each individual is determined by the joy he 
receives from spending money, and the pleasure of this spending 
is the net nature spreads abroad to have work done according to 
her plan, and opposed by the selfish greed of the individual, but 
labor soon learns it can have more money to spend by following 
the plans of nature than following its own short sighted plans. 
The power that moves the people of the world is found in the 
delight every man, woman and child receives from spending 
money. The greatest modem advance has been made in this 



26 SCIENCE OF VALUE 

direction by placing on woman the chief part of this delight, 
when but a few years ago, man done all the buying for his 
household. Unless each person gets the money to spend, which 
the laws of nature supply for him to spend, he loses his place and 
his function in the body politic, and will be cast aside as one of 
the unfit in the struggle upward, while at the same time he may 
be of the best texture in this complex life but not be getting the 
money provided for him. 

When we see the whole existence of society depends upon 
the market having consumers, buyers for everything that labor 
and machinery may produce, we will see that working is an 
effect of spending, and when the spenders are being provided 
with money, working will take care of itself. When we see that 
spending is the great cause of industrial activity, all saving will 
be found in the accumulated wealth from the past and then we 
will see the importance of increasing the spending of more than 
thirty million of our common laborers. 



CHAPTER IV 
PRICES ABOVE COST 

THE moment a rise in prices of goods is suggested it seems 
certain that every cent above cost must be a loss to all 
the people concerned, and cannot possibly become a 
benefit to labor, but as a matter of fact, wages cannot rise unless 
they do so from a previous rise of prices. Prices above cost are 
absolutely necessary if goods are to be sold to more consumers 
than there are producers of the same goods. If shoes are pro- 
duced by machinery, and one laborer produces a hundred times 
as many pairs as he will buy, he must sell the surplus, and selling 
this surplus depends, not upon cheap production and low prices, 
as we are told it does, but wholly upon prices above cost. 

There is no such thing as a cheap price, the thing that is 
important is not the cost, but is always the gain above this cost, 
and no matter how low this cost may be reduced, if the selling 
price is not above it the surplus can not find the money with 
which someone else can buy it. No matter how high the cost 
may be, if it will sell above this level it will stimulate business 
the same as at any lower cost, or more on account of the greater 
sums of money involved. 

All activity in production and trade depends upon two 
different levels of price, no business is possible if the selling 
price and cost are at the same level, and as long as there is a 
gain it makes no difference how high the cost may rise on 
account of an increase in wages, or on account of profits paid to 
capital. The reason for this apparently impossible situation of 
selling all the time for more money than is paid in cost, arises 
from the fact that the advance in price supplies twice as much 
money as the money paid in cost. When prices of goods are 

27 



28 SCIENCE OF VALUE 

lifted above cost it is because you have two laborers buying the 
same goods that only one laborer was paid to produce, thus you 
have two dollars buying at twice the cost when you would only 
have one dollar buying if the price was cost. But, in selling at 
twice the cost and, in selling so much greater quantity, you can 
reduce the expense of sale so as to make a profit equal to the 
price above cost and thus add another dollar to the whole sum 
in circulation, giving three times as much money when goods 
sell at the standard price of twice the cost than if they try to sell 
at cost and fail. 

It is hard to understand how money can increase prices of 
the things labor buys and at the same time increase wages, but 
when we see that profit money comes in as a new supply, it is 
only necessary to see that this profit becomes an ever increasing 
new demand for labor and in that case the greater the profit the 
greater must become the increase in wages. But if profit money 
is only used to exchange the cash that employs labor in building, 
and is then cancelled and fails to increase the demand for labor, 
it follows that profit is merely an instrument to inflate prices 
against labor, to force it to build capital for the benefit of its 
owners who get the profit from the sale of goods. 

This secondary labor which does not produce its own goods, 
but must work at something else to get the money to buy goods 
and increases the price of goods above cost, would not be em- 
ployed at this something else unless its labor produces some- 
thing as valuable as the other half of labor, and this something 
if capital. The laws of nature intend this other labor shall have 
its wages paid by the money received from selling capital, and 
shall not become a burden upon the money received from the 
sale of goods. If the increase in price above cost stops with 
goods, and is not allowed to be carried over into the capital 
market, the wages of the labor producing capital need not be 
paid by the primary laborers who supply them with goods, and 
will be paid from the sale of the capital product they them- 
selves send to market. Thus in selling goods produced by one 



PRICES ABOVE COST 29 

class of laborers and collecting all the cash that has been paid in 
wages to both classes, we seem to have no other real money but 
cash, and it seems as though capital must advance this extra 
cash and can only do so by having saved it in the past. 

But, as a matter of fact, the advance comes from credit 
money that buys the goods and waits until they are sold to 
repay this credit and have a profit remaining equal to the wages 
of the secondary labor, and by exchanging this bank profit for 
cash this labor is forced to work for capital for nothing and has 
its wages charged up to primary labor in the price of goods at 
twice the cost. But this capital, which has so far been a profit 
to its owner, should be able to also sell for more than it cost, 
up to the point where capital is newly produced. There is no 
money in circulation with which to buy it, all money being 
confined to paying twice the cost of commodities, and a buyer 
for capital must secure the money from capital itself selling at 
an equal gain above cost, so as to create its own supply of credit 
money. In this process of selling goods at twice the cost the 
advantage of location will permit goods to be sold in such great 
quantity that a new claim arises from the profit and this profit 
is expected to equal the price above cost. Up to this point we 
find that half the total goods are being consumed by the living 
of all the laborers, who divide in two classes and divide wages 
into two parts. From this sale to all the laborers another sum 
in profits is taken that exactly equals half the total wages, or 
equals the wages of half the laborers, therefore we have three 
parts of money to balance two parts of the product of only half 
the total labor, but have the buildings the other half produced to 
account for. 

Now return again to the whole commodity product, and 
you find it divides into four parts, one-half going to supply the 
material for rebuilding and new building of capital, one-fourth 
going to the laborers who are employed for the benefit of this 
capital, and one-fourth going directly to the primary laborers 
who produce the whole product. It should be clear that if the 



30 SCIENCE OF VALUE 

cost of only one-fourth of this product takes up all the money 
primary labor was paid to produce all of it, the whole product 
must sell for four times this cost, and in following this sale we 
can only account for three times the cost, — one time in the 
wages of primary labor, another time in the wages of secondary 
labor, and the third time in the profit taken from selling to both 
classes at twice the cost — ^while the fourth division of money 
remains to be accounted for. This is only one of the riddles of 
the Sphinx in this complicated credit problem, but it is the most 
important one, as it is the foundation for all the others. 

The money the bank supplies was earned by past labor, and 
when this money is exchanged for the cash that pays secondary 
labor and buys building material, it does double work. It 
increases the price to twice the cost in creating the profit money, 
and labor must work for the same money over again when it 
supplies goods to cancel this credit. This gives us the fourth 
unit of money by which the actual product of primary labor 
sells for four times its cost to pay the wages of secondary labor. 
This plan of taking all the capital from labor, and forcing half 
the total labor to support the other half may be successful for a 
very long time while a country is accumulating new wealth, and 
the system then wins general approval because many of the 
people become moderately rich from this gain, and are highly 
in favor of it. But a time comes when this inequality in dis- 
tribution fails by the concentration of wealth to a few owners, 
and when wealth and capital can no longer keep secondary 
labor employed by charging it up in higher prices, and taking 
profits twice — once in the capital- and another time in the goods 
market. 

The natural law expects the primary product to thus sell at 
four times its cost, being in line with the general plan of distri- 
bution, but does not expect that no other money shall be able to 
get into use on this account and that the extra supply should be 
cut off because this primary sum may be forced to do all this 
buying. When goods sell for four times the cost it is the in- 



PRICES ABOVE COST 31 

tention of nature to increase the supply of money by this ad- 
vance in price and pay the primary laborers the whole sum 
goods sell for, and not load down this sale of goods with the 
wages of secondary labor and with the cost of capital. 

If primary labor did get the benefit of its entire product 
selling at twice its cost, and had to pay this same advance for 
the one-fourth part it consumed, the gain would be with that 
labor on account of the greater proportion it sold than it had to 
buy. The higher the price the higher would be its wages, and 
the greater its surplus after it bought its own share. This is 
indeed a long way around in seeking an answer to the question 
in the beginning of this chapter, namely, how an advance in 
prices could increase wages? It comes from giving labor the 
benefit from the sale of its surplus at the same advance in price. 

We now come to the other part of the same question, a new 
Sphinx riddle, for if primary labor is to be paid wages that will 
include selling three-fourths of its product at twice its cost, who 
will buy? Where will the money to buy come from? This is 
the money we are seeking to have you understand, the money 
nature would supply from the labor of the past, instead of 
limiting the money in the whole market to that earned by only 
half of present labor. It is plain that if primary labor has the 
load of wages of secondary labor lifted from its shoulders, if 
the wages of this class must come from their own product, then 
the sale of capital must in some way provide an additional 
quantity of secondary money to pay the wages of secondary 
labor at the rate established by primary labor receiving the full 
selling price of its own product. In this very intricate system, 
profit is expected to be relieved from the double duty of raising 
the price of goods and then using the same money to pay second- 
ary labor for building capital, and not increase the rate of wages. 

The profit taken from goods should be carried over to the 
capital market by having but one real duty to perform which is 
to measure the value of capital. Without this duty we could 
as well dispense with profits, and not risk the great losses we 



32 SCIENCE OF VALUE 

have had in the distribution of wealth. The profit taken from 
goods becomes a rate of profit on the capital used to sell goods, 
to transport them or manufacture them, and this rate is in- 
tended to increase the price of capital so as to provide the same 
profit from the sale of capital that before had been taken from 
the sale of goods, and thus return to labor the money it advanced 
when it was forced to buy goods at prices above cost. The 
profit when it is carried over to the capital market cannot be 
cancelled by any higher prices, it is at the end of its journey, and 
is then expected to be taken up by higher wages. The demand 
for labor to build capital becomes so great as to include all this 
profit money from each market by an increase in the rate of 
wages. Capital can only secure this profit money by selling 
at twice its cost and can only obtain this selling price when it is 
built upon favorable locations giving it the advantage of selling 
or manufacturing in quantity on account of the density of con- 
sumers living in cities. 

In justice to capital be it said that it never fails to pick out 
the best locations and would never fail to properly improve 
them did not the cost of land interfere, and we would then get 
full credit for a rate of profit double the rate of interest on 
money. But unfortunately the land owner at that location was 
ahead of capital, and demands and usually gets all this profit 
above cost as a price for land, holds the selling price of capital 
to cost, and holds wages to the cost of its product instead of 
allowing wages to advance to the selling price. 

We go on improving a new country, increasing and accumu- 
lating wealth, in which labor gets no share, because the rise in 
price of land supplies the profit by which labor is employed in 
building. But when this rise in land value comes to an end in 
any community, all increase in wealth and progress comes to an 
end at the same time, and hard times and unemployed labor 
seem to be a natural condition because there is no demand for 
labor or capital and no demand for land at a price which yields 
no profit to capital or labor. 



CHAPTER V 
PAST LABOR MONEY 

IF there is a happiness for the entire body politic, like the 
happiness of perfect health for the human body, it will be 

found in getting and collecting profit money, and if there be 
a bluebird for society that brings this happy profit money, and 
may be frightened away and carry profit away with it, that 
bluebird is called Credit. 

While every one admits that business cannot be carried on 
without its required margin of profit, just as soon as business, 
becomes slack and labor is unemployed this profit is attacked. 
If ninety per cent of labor is employed because it is profitable 
for some one to employ them, the other ten per cent are idle 
because this profit fails as far as they are concerned. The 
trouble is plainly in not having profit enough, but we legislate 
on the theory that idleness is a result of having too much profit 
when it is self-evident it results from having too little. Profits 
depend upon wages. They may only be collected by selling 
labor for more than it costs, and idle labor means that it cannot 
be sold for a profit, which means that employed labor is being 
paid too little to supply the required profit for the employment 
of the others. Each laborer should supply profits from his own 
wages, but as a rule we pay profits by increasing our debts, and 
when we can no longer increase debts there is a general failure 
of profits in all commercial lines. 

What we should consider in legislation is the low wages of 
common labor that fail to carry the margin of profit upon 
which successful business must depend. The laws of nature 
demand that profits shall not stop at a point where they 
merely increase prices against labor for the things they buy, 

33 



34 SCIENCE OF VALUE 

but that wages must gain upon prices so that profits will 
represent a surplus in wages above the cost of living instead 
of allowing them to reduce the standard of living for the mul- 
titude of common laborers. Up to a certain point, profits taken 
from the sale of goods must become a loss in wages on account 
of an increase in prices which carries the cost of capital, and for 
this reason labor can only have this advance returned by the 
sale of capital at the same profit. Altho the laws of nature 
encourage the unequal distribution of wealth when it is being 
newly created, and postpones the payment of labor until capital 
can be sold and repay the profit taken from goods, the laws 
regulating the circulation of money do not fail in protecting 
labor and such failure is wholly a result of human law. 

Labor is protected by compelling capital to locate and 
so build as to insure this profit, and by preventing this 
profit from being cancelled by any increase in price except a 
rise in wages, or by debts which will destroy capital for its 
owner. 

The money to pay labor for capital can only arise after 
capital is earning an income, and is a different money from the 
cash that pays labor for goods, being past labor money 
on account of the time capital saves to the consumer of 
goods, and from time saved by the introduction of machinery. 
The difference between past labor money which represents 
time saved to present labor, and cash which represents 
time worked for by present labor is very important, for it 
holds one of the puzzling riddles of the Sphinx in the 
complicated circulation of money. Converting money, by 
which time has been saved by the accumulation of wealth, 
into cash earned by labor in producing goods may compel labor 
to part with all of its capital by compelling it to earn over 
again this money earned by past labor instead of getting it 
as an increase in wages. Cancelling bank checks with cash 
may work in just the opposite way from which the natural 
laws intend it shall work, and up to this date, in the 



PAST LABOR MONEY 35 

history of commerce, it has always worked in this opposite way. 
Instead of labor getting this credit money as an advance in 
wages above the cost of living it has so increased the cost of 
living as to give all capital to the rich as unearned wealth. 

The Magic Art of Finance 

The magic art of making money from nothing, by which 
the rich come into power and which has been so difficult to 
understand, rests upon the fact that each dollar in cash, repre- 
senting time worked by present labor, may support five dollars 
of credit representing time saved by past labor and labor 
may lose this time saved by being compelled to convert it 
into time worked for. If five dollars of time-saved money is 
not paid to labor as an increase in wages, no more of it can 
circulate than labor can redeem in buying goods at twice 
the cost, and the quantity of money is thus reduced to the 
very lowest sum on which the market can exist, and on which 
labor can exist. 

The property owner and banker, however, has the use of 
this credit money, and can put it into circulation and increase 
prices of goods against labor, getting the benefit of all the capital 
labor may produce, thus concentrating wealth instead of having 
the same wealth distributed among the laboring classes. In 
protecting labor from this unequal power over money, by the 
property owner and banker, the laws of nature first demand that 
profits upon goods shall also become profits upon capital, 
making them a medium between the two circulations of time- 
eamed-money and time-saved-money. The over-control of 
this time-saved money is secured in two ways. The first 
check upon the power of capital compels it to locate upon a 
very limited portion of the earth's surface which is confined 
principally to cities, while the production of goods may spread 
over the land and water surface of the whole globe. The second 
check is to force profits of capital to depend upon the time a given 
location saves to the consumer in buying goods, which prevents 



36 SCIENCE OF VALUE 

such profit from being taken from the advance in price of goods, 
the advance being compelled to carry the expense of doing 
business. You will ask how is it possible for profits to arise 
from anything but a difference between cost and selling price, 
and if expenses in business may defeat this profit, why was the 
difference in price introduced? The difference between cost 
and selling price was introduced to supply the money by which 
the laborers, not producing the goods they consume, should be 
able to buy them, and to have goods carry the money by which 
they are consumed. In selling goods at a thousand different 
locations in a city it will be found that each location has a limit 
in the number of consumers it may serve, goods selling at the 
same standard price at every location — all differences in build- 
ings, in profits and rents come from differences between gross 
sales and expenses. 

By following the money taken to a store it will be dis- 
covered that this money passes through a bank before it again 
returns to consumers to keep up the constant stream of buying. 
In thus passing through a bank the money leaves a record 
on the books of the bank of the difference between gross sales 
and gross expense of doing business, and if the record is in 
favor of the business it will show a profit; if not, it will show a 
loss of capital. This profit money does not arise until after the 
goods have been consumed, and is plainly not a part of the value 
of the goods, but creates a new claim upon the capital invested 
in the stock of goods or invested in the building. Manifestly no 
profit could return from consumers unless the owner had made a 
wise investment, had selected the right location, and had im- 
proved it with the right kind of a building. Hence the pro- 
tection to labor will appear to depend upon the foresight and 
wisdom of the owner of private property. Apparently this is 
the case, but in reality nature never makes the mistake of 
depending upon the human wisdom of a property owner when 
it has surer ground in his greed, for unless he makes a wise choice 
he will lose his own money. Nature goes a step farther in 



PAST LABOR MONEY 37 

depending upon the greed of the property owner in protecting 
labor by improving favorable, natural locations. It will not 
allow labor to get a return of its money advanced to build capi- 
tal until after the owner has first secured his cost of capital, and 
has a profit on this cost. Labor must be paid from this profit 
money. 

When property is so located and built that it may have its 
money returned and get the prevailing rate of interest in addi- 
tion, then, and only then, may labor secure its advance in wages. 
It can get nothing from the return of the principal. If six per 
cent is the general rate of interest, this rate, at the end of fifteen 
years, when the property is supposed to be consumed, will have 
paid twice the money, the interest having piled up a sum to 
equal the principal. This interest, be it understood, is being 
paid all the time upon all the wealth accumulated from the past, 
and consumes all the profit taken from goods. This profit 
money then represents the capital that is being produced each 
year because the price of goods above cost is but another name 
for the cost of capital produced at the same time, as the two 
sums must balance. This is to say that if the owner of 
property is to get his principal in money and his interest at 
six per cent the total income from all property must be twice 
the money paid out as cost of capital each year. All property 
produced each year must therefore sell for twice its cost if the 
owner is to get both his principal and the regular rate of 
interest on the total wealth. The wages of labor must increase 
from profit arising when the capital produced each year sells for 
twice its labor cost. This profit piles up as an increase in money 
that has no other outlet than to increase the demand for labor, 
or would not if the demand for land did not come in at this point. 

Capital will not be produced unless the owner can get his 
money returned and the regular rate of interest beside, and, 
therefore, it will not be produced unless it can sell at a profit 
above cost. But as land must be paid for and as the price of 
land can advance to take up all this gain in the price of capital, 



38 SCIENCE OF VALUE 

we soon come to an end of the production of capital by a rise in 
cost of land destroying all profit in it, and preventing the rise in 
wages by which new capital may collect the rents it must have 
to sustain it. If capital had no cost of land to pay there would 
be no other limit to the demand for labor than the ability of 
labor to supply the market with the things money would buy, 
for then all profit must increase the demand for labor as being 
the only road by which profit may be secured, the advance in 
price of land having been taken from the market. 

We may now be able to see that the introduction of profit 
money up to a certain point increases the prices of goods, and 
instead of this profit continuing and being carried over to the 
capital market where it could no longer increase prices but must 
increase wages, we see it taken by an increase in the price of 
land. Up to the point where credit money takes profit from 
goods all financial writers agree as to the function of credit 
money — to a point where it is a total loss to labor, and where it 
must be earned twice, — once in creating a profit in buying goods, 
and again in cancelling the profit by building capital for its 
owners. These financial writers never follow credit beyond this 
point, thinking its use ends when labor cancels it by earning 
it twice over. This is but its beginning, laying the foundation 
for an increase in wages by the credit being carried over to 
the capital market in capital selling at the same level as goods. 

The next step will be to consider this extension of credit 
over into the capital market which depends upon the elasticity 
of the currency. It is the duty of credit money to increase the 
quantity of money acting as cash by paying higher wages, 
and put five dollars of credit money in the wage fund for 
each dollar of cash it contains. The fog, in which the mind is 
enveloped, concerning the money paid in wages arises from a 
failure of the imagination to conceive of another quantity of 
money not now in general use, but waiting in banks to be called 
into use by which we will solve all our social problems by paying 
much higher wages and profits. 



PAST LABOR MONEY 39 

While it is generally admitted that the unjust distribution 
of wealth represents the failure of government to secure the 
rights of labor in this wealth, it never seems to enter the mind of 
the reformer that a just distribution of this wealth can increase 
present wages, and that we can pay labor an increase in money 
derived from this wealth. All theories dealing with social 
distress seem to expect the impossible, to accomplish results 
without making any change of importance in prevailing con- 
ditions, to merely rearrange the present wage fund and present 
profits, leaving general conditions practically the same as before. 
Each theory of reform is based upon some rearrangement of the 
present supply of money paid in wages and profits, upon the 
present income, and not one contemplates increasing that 
income by tens of billions of dollars every year and adding 
thirteen billion or more dollars of idle credit to the wage cir- 
culation. Each theory holds that profits must be deducted 
from wages instead of discovering the truth that the increase in 
wages depends upon a previous increase in profits, that profits 
cannot be collected unless they are paid in wages, and they 
must first increase from an increase in credit money. 

No one seems to observe the present value of land having 
any influence on the circulation of money, altho land commands 
a money value of sixty billion dollars, and while every other 
price is supposed to influence wages, the price of land, which 
causes all the labor troubles, entirely escapes observation. No 
one considers the self-evident truth that if land could not be 
sold, the entire demand that money creates would become a 
demand for labor, and every dollar of profits taken from labor 
must then return as an increased demand for the same labor, 
that wages must rise on this account until they include all 
collections of profit money, and until labor may buy back its 
total product at its market price of twice the cost. 



CHAPTER VI 
THE ELASTICITY OF THE CURRENCY 

NATURE has an intricate process by which it keeps the 
quantity of money on an equality with the increase in 
value of accumulated wealth so that such wealth may 
exchange for money. The elasticity of the currency, supplying 
wealth with money, is based upon the value of that wealth, a 
value that is a measure of the time labor worked to produce 
it and the time labor now saves by having it on hand. 
Elasticity, for this reason, depends upon a separate circulation 
of money differing from the money paid to present labor for the 
goods it sends to market. 

, Elasticity depends upon being able to convert this separate 
money into the cash, and to increase the quantity of money 
acting as cash without increasing the supply of cash and with- 
out increasing the prices of goods. To have five times as much 
of this money as of cash. We have made many attempts in 
the past to secure this elasticity in money which would buy 
property without interfering with prices of goods, and thus 
avoid the constantly increasing danger that comes from 
debts. 

All such attempts to make the currency elastic fail because 
the value of land is included in the things money is expected to 
buy, and as there is no labor cost for land by which its value 
may be limited the same as values of goods or property is 
limited, the value of land will rise faster than money can be 
increased to buy it; and by so doing it destroys the benefit of the 
increase in money as it before destroyed the benefit from the 
supply on hand. 

The elasticity in the currency comes from a gain in the 

40 



THE ELASTICITY OF THE CURRENCY 41 

selling price of wealth above its cost on account of its location. 
The profit in selling wealth is expected to supply the quantity 
and elasticity of money, but the value of land advances as fast 
as capital improves locations and destroys the profit upon 
which elasticity depends. All former attempts to supply an 
elastic currency were limited to an inflation of the primary or 
coined money of a country, and as the function of this money is 
limited to prices of consumable goods, and as it cannot increase 
in quantity without such increase being balanced by a corre- 
sponding rise in commodity prices, all attempts to supply a 
money for property failed. The reason credit money must 
supply the elasticity of the currency arises from the fact that it 
is based upon wealth inherited from the past, and in order to 
limit its functions to the value of this wealth it has a different 
law by which it circulates. 

The first important difference between the functions of cash 
and credit will be found in the different fields to which they are 
each limited, cash having a world-wide field on account of its 
universal commodity value, and credit having a very limited 
local field, being issued from a local bank and returning to that 
bank to maintain its value on a cash basis. A good illustration 
of this difference in fields of circulation, and of the greatly 
increased quantity of credit in its local field, will be found in the 
local street traffic in a city representing the local movement of 
credit when compared with the steam travel from the city as 
representing the movement of cash. The next important point 
of difference between cash and credit is the permanent quantity 
of cash compared with the ephemeral quantity of credit which 
is being issued and cancelled daily by the use of bank checks. 
We cannot diminish this permanent stock of cash by investing 
it, nor impair its usefulness by the increase of debts. It is 
proof against the fool-killer, but it is not so with credit, which 
may be invested and retired from circulation. Being cancelled 
in such enormous quantity every day, it may fail to come back 
the next day, and over night inflict the commercial world with a 



42 SCIENCE OF VALUE 

serious crisis like a stroke of lightning from a clear sky. The 
next important point of difference is the method by which they 
each circulate. In any exchange of goods for cash the goods 
are taken from the market and are consumed,.while cash moves 
to fill up this vacuum in goods by maintaining a permanent 
reservoir of value which it communicates to new goods coming 
to market. But with credit this process is exactly reversed, 
and in order to create a vacuum by which it may circulate when 
property is not consumed, the money itself must be consumed 
and be reproduced. When a building is being built the surplus 
money to pay for it is in the form of a bank deposit and as this 
money is being converted into cash to pay for labor and ma- 
terial, it is being consumed while its value is being con- 
verted into the permanent value of a building, and if this money 
is to be reproduced it must do so by the building selling for a 
profit equal to its cost. When we thus cancel credit in building 
and charge it up to labor in buying goods, and fail to reproduce 
this credit by the sale of the property at the required margin of 
profit, we thereby destroy the elasticity of the currency and 
have no more money in actual circulation than the quantity of 
cash. The credit used is merely a substitute for this cash. 

We are misled into believing that we have a great credit in 
circulation by the enormous value of the transactions in the 
commercial market on a credit basis, which pays ninety per 
cent of all commodity claims, but this credit is not in actual use 
as money. It merely holds certain accounts in short suspense 
while goods pass from one middle man to another. A car of 
wheat, for example, in passing from the field where it is produced 
into bread when it is consumed, will be bought and sold many 
times before the final settlement has been made by the bread 
consumers. At each such exchange the value of the car of 
wheat is recorded by the bank clearings, but the actual credit 
involved in this transaction is limited to the profit finally paid 
by the consumer of bread which was converted into wages 
before it is paid by the consumer of bread, and there is a very 



THE ELASTICITY OF THE CURRENCY 43 

narrow limit to the quantity of credit which may thus originate 
from the sale of commodities. The profit from the sale of 
goods is limited by the wages of surplus labor. The absolute 
limit in this profit is half the total wages, and it is upon this 
absolute limit in primary credit that banking is founded because 
it becomes a substitute for cash and allows that cash to become 
bank reserves. A good illustration of the failure in limiting 
credit to the commercial market, where every dollar of it must 
be cancelled by a dollar of cash, may be found in the history of 
the circulation of cash money in the United States. 

Going backward to the year 1880 — the exact date is not 
important, nor is the exact quantity important — we find, from 
the comptroller's reports, that the quantity of cash in circulation 
was one billion dollars in round numbers. Having no elasticity, 
by which we could draw upon any other volume of money, this 
limit in quantity of cash set the absolute limit to the quantity 
of business for that year by the fact that we had to use this 
billion of dollars over and over again and could not get it to use 
any faster than we could pay it to labor and collect it from labor 
by the sale of goods, which was six times a year, or once every 
sixty days. This limit in the annual retail business of six billion 
dollars for the year 1880 determined the limit in profit at half 
this total or three billion dollars. This profit had to pay all 
interest and dividends upon the total wealth, and it thereby 
governed the value of that wealth. 

If we suppose the average rate of interest to have been 
between six and seven per cent we arrive at the total wealth by 
multiplying the total profit of three billion dollars by this rate 
and get a total of fifteen times three billion or forty five billion 
dollars total wealth — statistics for that year give this wealth 
at forty four billion. 

This is the place to call your attention to the fact that in 
dealing with money, prices and wages as the elements in the 
science of value, we deal in numbers and have a science based 
upon mathematics the same as astronomy. The circulation of 



44 SCIENCE OF VALUE 

cash is as certainly regulated by natural law as the daily turn- 
over of the earth on its axis, while the circulation of credit com- 
pares with the annual revolution of the earth arouhd the sun. 

We come now to the failure of elasticity being in a measure 
relieved by the accidental inflation of this billion dollars in 
primary cash, the rise in value of land destrojdng all profit in 
the capital market, holding business to this fixed basis with the 
certainty that had not the currency been increased the increase 
in population and the increase in production from new lands 
must be followed by violent falls in wages and prices and by a 
revolution in government. 

From the year 1880 to the year 1893 the quantity of 
primary money increased by six hundred million dollars, and 
business correspondingly increased in the same period, that is, 
six hundred million dollars multiplied by six times its circulation 
gives us the gain in annual trade, and half this gain in trade the 
gain in profit, and fifteen times this profit was the gain in wealth. 
Thus the annual business in 1893 according to this calculation 
was nine billion six hundred million, the profit half this sum 
of four billion eight hundred million, and the total wealth 
fifteen times this profit, or seventy two billion dollars. Sta- 
tistics three years earlier give the wealth at sixty five billion. 
During this inflation of the primary money from 1880 to 1893, 
of six hundred million dollars there was no general increase in 
commodity prices, the increase in total production, and the in- 
flux of labor absorbed the increase in money at average wages 
and prices. During this period the increase in wealth of twenty 
four billion dollars allowed an increase in land value of half this 
sum, by taking profits belonging to capital and upon which the 
elasticity of the currency depended, and as the price of land 
destroyed the profit the stringency became as acute in 1893 as 
in 1880. 

From 1893 to 1897 there was no material gain and business 
began to feel the strangle of an inflexible system, the increase of 
laborers could only be employed by a decline in wages and prices, 



THE ELASTICITY OF THE CURRENCY 45 

but in spite of such declines the number of unemployed in- 
creased during this entire period and prices fell to the lowest 
point in our history. During this period all profit in building 
having been destroyed by the rise in value of land, which culmi- 
nated in the panic of that year, building came to a virtual stand- 
still because no new debts could be made unless old ones were 
liquidated by bankruptcy, this being the only money released 
for building. 

Following 1897 and continuing until 1913, a period of six- 
teen years, with two important exceptions, 1903 and 1907, which 
were panic years, the currency failing to increase, the whole 
period was remarkable for doubling the entire supply of money, 
adding as much in sixteen years as had before accumulated 
during the history of the country. This was the period of our 
greatest expansion in wealth and population, and credit is taken 
for it by a political party, and by various laws of one kind and 
another that had nothing to do with it. The whole cause lay in 
the abnormal inflation. 

This increase was so great that in spite of the greatest 
immigration in history, the production of commodities could 
not keep pace with the gain in money, wages and prices ad- 
vanced twenty per cent for wages and forty per cent for prices, 
as would be the rule in such cases — prices twice as much as 
wages. This inflation of sixteen hundred million dollars meant 
doubling the annual business of more than nine billion to about 
twenty, or six times the volume of thirty two hundred million of 
money, an increase in wealth of seventy two billion dollars — as 
much in sixteen years as in the whole previous history of the 
country. This increase in wealth was partly speculative 
because production could not keep pace with the inflation of 
money, and the total may have been less than the one hundred 
and forty four billion, a calculation based upon the quantity of 
money. The value of land again advanced to take up half the 
increase in wealth and to again destroy all profit in building and 
bring the country to its knees in the present period of hard times. 



46 SCIENCE OF VALUE 

To remedy this uncontrolled inflation of the primary 
money we have enacted the Federal Reserve system of banking, 
but this is not designed to bring that elasticity the natural law 
demands, but rather to prevent undue expansion of both cash 
and credit in the commercial market, and so far in 1915 it has 
succeeded only in contracting the primary money and in making 
hard times worse than they were before. 

If the reader has any doubt concerning the accuracy of the 
monetary statistics here used he may consult any reports of the 
currency and verify the statements. Tables are not given 
because they annoy the general reader and the student will be 
able to easily ascertain the truth. 

The question must be. What of the future? We are in the 
peculiar position of being damned if we do inflate the currency 
by a rise in value of land, and damned if we don't by the fail- 
ures, in every line of business, by losses of employment, of 
profits and of wealth. 

The answer is that the whole world, in consequence of the 
times, and the war answering the times, must face the riddle of 
the Sphinx in what is known as the labor question, the money 
or debt question, and must finally solve this world-old riddle or 
see its civilization destroyed. The solution is self-evident — the 
abolition of debt by instituting a cash market for all capital 
securities. 

Since the increase in value of land is responsible for all our 
money troubles, our labor troubles, and the unjust distribution 
of wealth, we next take up this most important of problems. 



CHAPTER VII 
THE VALUE OF LAND 

HENRY GEORGE made a very great discovery when he 
found that the rise in value of land was responsible for 
the persistence of poverty amid the greatest plenty 
ever provided for mankind in a sparse population with super- 
abundant land. 

He again made the land question a burning issue by calling 
attention to the value of land apart from the land itself, and 
demonstrated that no possible allotments of land, to small pro- 
prietors, could remedy the evil of property in it. The value of 
land was responsible, he said, and the more the land was divided 
among small proprietors the greater would become its value, and 
the harm from such property would increase instead of offering 
relief. 

He saw in California that wages for common labor were 
high before wealth developed, and he reasoned that every in- 
crease in wealth, from the fertility of the soil, from buildings and 
improvements of every kind, from trade and transportation, 
from invention and discovery, from education and government, 
from morals and religion, should increase wages. But the wages 
of common labor remained stationary or declined, while the 
wealth of California advanced far beyond his dreams or his 
imagination. He discovered the advance, which he supposed 
would increase wages, to have actually increased the selling 
price of land, increased the cost of land to every one who sought 
to improve it. 

This rise in value of land was an effect of other causes 
behind it, which held wages to the minimum level at about the 
cost of subsistence, while the value of land increased to take up 

47 



48 SCIENCE OF VALUE 

all the gains from progress, whether these gains were in popu- 
lation, in education, in better government, in railroads, in ship- 
ping, in towns or cities, or in improved farms. 

In seeking a cause for this rise of land value Henry George 
quitted the world of facts in which he made his great discovery 
and sought an explanation in the world of books and theory, and 
there found an explanation ready made which seemed to supply 
his want, known as Ricardo's "law of rent." This law of rent 
is said to be a law to account for payments to the landlord for 
the use of land, but is, in fact, a law seeking to account for the 
low wages of labor and to replace other explanations of low 
wages that did not fit the facts. 

According to Ricardo — in a great field having ten different 
areas of fertility, an acre of the poorest land in use will produce 
five bushels of wheat, and this yield will advance with the fer- 
tility of the soil until other acres will give a maximum yield of 
forty bushels. Ricardo's law then asserts that all this wheat, 
above the minimum yield of five bushels per acre, is due to the 
fertility of the soil and not to the activity of labor, that the 
claim of labor is limited by what it may produce on the poorest 
land in use and without any assistance from the bounty of 
nature. 

Notice how impudent is this claim. The landlord appears 
first and takes everything from labor because labor must live 
and has no right to any of its product which belongs to the land- 
lord who pays labor from the total it produces the least labor 
will consent to work for. Instead of assuming the landlord is a 
natural institution, like the land itself, suppose we assume he 
would not be there unless he had the armed power of the gov- 
ernment to enforce his claim upon labor. Suppose you then 
have the field with ten different fertilities of soil and the laborers 
who produce wheat. Will they divide this wheat as though the 
fertility of the soil gave all but the minimum yield to a landlord, 
or will they consider the whole product to be the wages of all the 
laborers and divide the whole yield among the total number who 



THE VALUE OF LAND 49 

engage to produce it on the theory that each laborer is entitled 
to an equal share because he performed an equal amount of the 
total labor? 

The purpose of the Ricardo law in thus separating the 
productivity of nature from labor was to give a valid title to the 
product taken from labor that otherwise was a plain robbery. 
This theory gave to the men who were rich a valid title to their 
wealth, and labor was supposed to have no defense against a 
title given by a natural law making soil fertility benefit the 
rich as a class. 

This claim of natural law, for rent, is so absurd that the 
wonder grows how it could have had the wide support it every- 
where enjoys. It merely reasons around a vicious circle begin- 
ning with a landlord as an accepted and natural condition, that 
must not be questioned, and taking conditions landlordism im- 
poses, it proves they are right because the landlord imposes 
them. 

A natural law giving rent to a landlord would not call for 
the armed support of the government to enforce it which land- 
lords must have and have had from the beginning of history. 
Payments, under natural law, are voluntarily made, as we make 
them every day in buying goods or building houses, but no man 
ever voluntarily paid for the land he wanted to improve. Ac- 
cording to this assumed natural law the Lord created the land- 
lord before he created the earth and then made the earth to fill 
the specifications supplied by the landlords, giving all its 
powers of production to them, and only the sterile land, the 
land the landlords would not take, was to go to labor. 

Nature does not give its productive power to any who will 
not labor, not even to capital. Labor alone has a claim upon 
its product, and no one may take a penny of it without giving 
the value of a penny in return according to natural law. But 
Henry George, following Mills' theory, extended this law of 
rent to cities, where capital accumulates, and where the whole 
consumable product goes plainly to the consumer. In cities 



50 SCIENCE OF VALUE 

the value of land was said to be something else than what 
Ricardo claimed it to be, namely, Ricardo rent capitalized, — 
not taking anything from the present product of labor but. 
always taking the future product in advance. 

If the sum taken by a landlord for the use of ground is one 
thousand dollars a year the ground will sell for twenty thousand 
dollars. It is said to sell for twenty years' future rent. While 
it is physically impossible to take something in the present that 
can only come into existence during twenty future years, let us 
ask what sets this limit at twenty years when ground rent in 
London has been collected from the same leasehold for a 
thousand vears? 

There need be no mistake made in this matter of capital- 
ized value. Twenty years is the time taken to return the money 
advanced by labor to build capital and paid for in goods at 
twice the cost, the landlord takes the increase, belonging to 
capital above the rate of interest, and will not allow capital to 
get anything but its cost returned in twenty years, and this is 
why the cost of land becomes so destructive. Notice what 
Henry George abandoned when accepting this theory of un- 
earned increment, calling the value of land its future rent. He 
claimed that the whole value of land represented something that 
was intended to increase wages as wealth increased, but by this 
change it is only the interest on this value and not the principal 
that is in question. 

But the difference does not end there. This interest does 
not even belong to labor according to this version of capitalized 
rent. It is said to belong to society and to provide a natural 
system of taxation, and humanity is to be reformed by lifting it 
bodily in its boot straps by making everybody satisfied from a 
change in taxation. Society has no right to take a dollar from 
labor in taxation, or otherwise, without giving a dollar of service 
in return and to make society the landlord does not in any way 
reduce the evils of the system. 

When it is asserted that rent represents a return of money 



THE VALUE OF LAND 51 

advanced by labor in building, it will be held that a city con- 
tains very valuable lots upon which no buildings have been 
erected, but surely no one will claim that such vacant lots are 
collecting any rent by natural law, or any other law. The 
longer the vacant lot is without its building, the more the owner 
loses on that account. 

A million dollar lot represents the demand for a million 
dollar building on account of its city location, and this building 
is expected to have an income on two million dollars, to sell at 
twice its cost, and the land value is either half of a completed 
building, or half of an expected building. When a builder 
appears who would improve a million dollar lot with a million 
dollar building the quantity of money in circulation cannot 
supply both the value of the building and of the lot, but the 
building must have its money to pay labor and the value of the 
lot can be satisfied with only the interest on the investment. 
The result is that the builder gives to the landowner a claim on 
the new building which equals half its selling price. He gives 
the owner a half interest in the building he creates for the 
privilege of building at a place where he will get his money back 
with interest. What actually happens when a man must buy a 
lot on which to build is that he has the money to pay for building 
but no money to buy land, as nature refuses to provide money 
for this purpose, he gives up his money to the landlord for 
the land, and then borrows his own money from the landlord to 
erect the building. 

If landowners could not profit from a rise in value of land, 
and could not thus borrow and create debts on the value of 
land, they would have to build or lose the value of land, and 
as all profit would then be confined to lines of buildings, 
the present absurd land lines separating individual owners 
would soon disappear. In a city like New York, for example, 
unable to mortgage land, because its value can not be insured, 
the demand for buildings would come from the high rents and 
dense population in congested districts where a gi-eat increase 



52 SCIENCE OF VALUE 

in rent would enable modern buildings to be erected for the 
laboring population whose wages would have greatly increased. 
In such case the contemptible land lines that now divide a block 
with sixteen or more miserable shacks would disappear, for the 
new building, to be successful, must occupy the entire block and 
the interests of the present owners would compel them to com- 
bine their holdings into the new building. In such case the 
city could and would control the size and architecture of all 
buildings by being able to finance them in a cash market, taking 
charge of the issue and sale of securities. As each building 
would have an income to cover twice its cost, and as each would 
be self-supporting and return the cost from its income, there 
would be no limit to financing new construction but the limit of 
labor and material to do the work. But let us give Henry 
George full credit for his great discovery and not find fault with 
his mistake in accepting Ricardo's law of rent. The mistake 
was human and could not well have been avoided at that time, 
1880, for much advance has been made since then. 



CHAPTER VIII 
COMPETITION 

THE false theory of Malthus, that low wages was a result 
of more people trying to gain a living on the surface of 
the earth than the earth could supply with food, and 
the false theory of Ricardo that the competition of the people 
for land on which to live in the thickly settled parts of the earth 
was responsible for low wages, have given us a popular but 
equally false theory of competition. 

The development of capital and the accumulation of wealth 
relieves the civilized world from any necessity for that form of 
competition which reduces wages, and by which some are wholly 
idle because there is not work for all. We always consume 
goods as fast as we produce them no matter how great may be 
the quantity and variety added by machinery. We have never 
more than thirty days' supply on hand, and a manufacturing 
nation has less in store than an agricultural people. But we do 
not consume capital nearly as fast as we produce it, and the 
money value of capital opens up the stores of the whole world to 
a people who have accumulated great wealth, and this has made 
famine all but impossible with a well regulated financial system. 

Civilization is an organized protest on the part of Nature 
against the struggle of the fittest to survive, by which the high- 
est animal type was evolved. The body politic creates an 
environment in which there shall be no unfit, an environment 
into which the savage has been driven to escape the struggle for 
an animal existence. The body politic has for its main purpose 
the welfare of the weak, the physically weak, to make men 
intellectually and morally strong. Civilization develops to 
secure that immortality of the soul for the individual man which 

63 



54 SCIENCE OF VALUE 

the animal struggle for existence failed wholly to take into 
account. 

Competition in the markets of the world is of two kinds, as 
Herbert Spencer has shown: Positive competition between 
things which are alike, and by which some of the forces com- 
peting and some of the things are destroyed. A fall in the 
price of cotton, for example, below its standard of twice its cost 
on account of competing cotton, is a destruction of some of the 
cotton; to have us understand, we wasted the labor in producing 
it when a greater crop will sell for less money than a small crop. 
Not only do we thus lose the cotton, but, as has been before 
described, we lose the money the higher price of cotton would 
have spent in making improvements by employing secondary 
labor, and we lose this money as often as it would have turned 
over in a year. 

Relative competition, on the other hand, comes in with the 
'accumulation of wealth to supplant destruction from an over- 
production of only a few staple crops. Relative competition 
regulates one price by the relation it bears to all others when its 
consumption is great, and a slight change in price will drive 
consumers to buy something else. It is this relative competi- 
tion we seek to destroy by legislation in favor of the positive 
kind which we have long since outgrown. We seek to destroy 
what we call monopoly, which seeks to establish the natural 
standard level of prices. Nature is rewarding men who succeed 
in holding prices to this high level with riches beyond the 
dreams of avarice. 

The unequal wealth we think comes from monopoly really 
comes from positive competition, forcing wages to a low com- 
petitive level, allowing labor to be bought at a low level, while 
its products are sold at the high level of monopoly, or relative 
competition. If we had a monopoly level for all prices this 
difference by which great wealth unjustly accumulates would 
be destroyed, and wages would rise to the same plane as that at 
which its products were being sold. The idea that competition 



COMPETITION 55 

among laborers must hold wages down and cannot be avoided, 
comes from the idea that land is so limited in productive centers 
that the struggle for existence is but a competition to share in 
land among more people than we can find room for. 

It is claimed, for example, that the crowded condition of 
great cities, and the poverty in such over-crowded sections, 
denotes an intense competition for the land on which to exist, 
that people are driven from the country, where land is plentiful, 
by the landowners and coming to the city herd like cattle and 
depend upon public charity. 

Take the most thickly populated section on this earth, the 
East side in the city of New York, and at no point in this con- 
gested district is the population as crowded as it is on the ground 
occupied by the McAlpin hotel in that city with its fourteen 
hundred guest rooms on twenty two floors. The poor on the 
East side in New York could be as well provided for as are the 
guests at this great hotel had they the money to pay, and they 
would have the money to pay for splendid accommodations on 
the East side did they receive the wages the laws of nature now 
provide for them. 



CHAPTER IX 
INCOME 

THE land where income is enjoyed is the fairy land of 
humanity, the land of perpetual sunshine, of feasting 
and music where pleasures of kings, queens and the 
nobility are supposed to fill the happy hours and where there is 
none of the responsibility of labor. 

This land of income is the land of romance and mystery, 
celebrated in story and song, where magic money flows from 
nowhere at all and showers its Aladdin gifts upon a small and 
favored class who claim to be the elect on earth and the favored 
of God in Heaven. This land of fairies and fables needs to be 
explored, and the cold light from truth turned upon its gilded 
magnificence, turned to the facts of the outside world and 
expose this unjust distribution of wealth which fills it with 
misery and despair. 

We are confused about income on account of the great 
accumulations of wealth to a few families by which they live in 
great splendor without exhausting any of their wealth but keep 
adding to it. If wealth had been as widely distributed as the 
laws of nature would have it, and as the correct circulation of 
money would compel it, this confusion would never have arisen, 
altho we might have had a considerable class of moderately 
rich people. If wealth was properly distributed we would dis- 
cover that no one was living upon the income it provided, but 
was living by the change in the wealth itself to new owners each 
year, that income must be spent to keep wealth in repair. 

A man who works and invests his surplus until he is ready 
to retire at an age of fifty or sixty years, must live out his life by 
exchanging his past labor with present labor for the things he 

56 



INCOME 57 

must consume in exchange for wealth that is not so consumed. 
A man cannot be expected to accumulate a house full of meals 
and clothing to be consumed during his old age. He must save 
something that is not so rapidly consumed, but which will be of 
equal value to the things daily consumed. 

A man cannot as a rule save money and store it. This 
hoarding of money will so reduce the supply as to prevent the 
very surplus upon which he must depend. Nor can a man save 
credit by having a bank keep his money, for unless a bank 
can loan his credit, which means the bank buys property paying 
an income, it must charge the depositor the same interest it 
would otherwise collect from loans so as to meet its own expenses. 

There are two ways by which money comes to its owner 
from property. One is in collecting an income and the other is 
by the sale of the property from a distribution of the total 
wealth. We will be paying income whether property is being 
naturally distributed or whether it is being unnaturally con- 
centrated. The income is the constant return of money used in 
building new wealth, or in maintaining the wealth on hand, 
just as money from the sale of goods gives rise to a constant 
income to labor in wages, so money paid for building gives rise 
to its income in rents. 

The most important human desire by which we secure an 
accumulation of wealth is the desire to make some future pro- 
vision for the growing family before old age overtakes us, and to 
make some provision for the time when we will no longer work. 
We do not accumulate wealth from a desire of becoming million- 
aires as writers of fiction would have us believe. This ambition 
is making us a nation of snobs and scoundrels. If we could 
imagine wealth widely distributed so that the whole accumu- 
lation became surplus in the hands of the greatest number of 
families to protect them from want, we would then be aware of 
the fact that this wealth must be sold to make provision for old 
age, no one could depend upon its income, the ability to sell 
this wealth, rests upon the ability of labor to secure more 



58 SCIENCE OF VALUE 

than a mere living because labor must become the buyer of it. 

There must be a limit to the amount of wealth from the 
past which we can cash in every day in exchange for the things 
present labor must produce; a limit to spending money, that 
would otherwise have no limit if the tens of billions of dollars 
worth of wealth could exert its full power over present labor. 
We will find the answer to the speed with which past wealth can 
be converted into present money by the speed of creating that 
same wealth when it was being accumulated, or the speed by 
which it may be again accumulated as it is sold to new buyers. 

A family making a new home on new lands, for example, 
will build a comfortable log house during six months of the year 
besides planting and harvesting its necessary crops, and if 
building was more profitable than the increase in farming 
operations it would devote all its spare time to such building. 
This one h"ouse, built in six months, would represent the power 
of its surplus labor after its living was assured, and as the house 
will last fifteen years before it need be replaced by a new one 
they could build houses for their neighbors, or build houses in a 
village until thirty had been built. When thirty houses had 
been added to the supply of wealth the first one would have to 
be rebuilt and this surplus labor would then find its limit by the 
wealth it could maintain. If, in the meantime, manufacturing 
had developed lumber, glass and other building material, the 
log houses would give way to houses of a better class, but the 
fact that we reach a limit in the accumulation of capital by 
using up all our surplus labor and material in maintaining a 
fixed supply can not be disputed. 

Let us assume, for example, that the United States reaches 
this limit with two hundred billion dollars' worth of wealth, at 
which time the wealth consumed each year will just be balanced 
by the wealth produced, and our total becomes stationary or 
nearly so. There will then arise an average yearly renewal of 
this total, which will fix the rate of interest on money because 
it will represent the money spent each year to renew the total 



INCOME 59 

compared with this total. Thus, if the rate of interest on 
money is six per cent, it means that about one-fifteenth of the 
total is being renewed each year, and the whole will be repro- 
duced in about fifteen or sixteen years if we add nothing as gain. 
Now it should be clear, when seeking buyers for the wealth, 
to obtain present money on which to live, that the limit to the 
power of wealth to cash in, and sell for its value in money will 
be the total wealth we reproduce each year. If the total is two . 
hundred billion dollars and the rate of interest is six per cent, 
and the time at this rate is fifteen years, we can sell one-fifteenth 
of two hundred billion each year, or about seventeen billion 
dollars' worth. Notice that this wealth we can sell each year 
is the whole sum nature allows for total profit on all enterprises. 



CHAPTER X 
CAPITAL 

THE credit for making capital a burning issue in the modern 
world belongs to Carl Marx, the founder of modern 
socialism, and is like the credit due to Henry George for 
bringing the value of land to public attention. Strange as it 
may appear each of the great leaders of modern thought was led 
into the same fatal mistake in believing the rights of labor were 
confined to the income from the value of land in one case, and to 
the income from the value of capital in the other case, each 
failing to see that labor had rights in the total value, and that 
income had little to do with the main issue. 

While maintaining as a fact that wages lost the entire value 
of land Henry George abandoned this fact for the theory that 
only the income was lost and that society, and not labor, suf- 
fered by not taking this income in taxes that the loss of labor 
arose from the burden of indirect taxation. Marx saw equally 
clear that labor in some mysterious way suffered a loss of all the 
wealth it had created in the past, and lost the wealth it was 
continuously adding to this total, but in trying to locate this 
loss he confined it to the profit taken by capital from the goods 
labor supplied. This error arose in each case from a false 
premise holding that living labor was the cause of value, and 
all that living labor could lose was a part of its present product, 
not seeing that accumulated wealth should increase wages from 
the value of past labor. If the mistake made by Henry George 
could be set against the mistake made by Carl Marx, and if the 
truth each discovered could then be united, by cancelling the 
mistakes of each, the true solution would appear to both schools 
of thought. 

60 



CAPITAL 61 

Henry George sees a natural law in the payment of income, 
but fails to see that this payment is for capital and is a return 
of the money advanced by labor to build capital. Marx sees 
that profit belongs to capital but does not see that it is paid in 
consequence of a natural law for if he did he would not then 
propose to abolish profit, Marx's followers, abandoning the 
idea that they may set aside a law of nature, could unite with 
the followers of Henry George and discover that the value of 
land takes all the capital from labor as fast as it produces it. 
This land value does its damage because it destroys the very 
profit upon which higher wages must depend. The failure of 
both theories arises from a false premise, the writers not seeing 
the self-evident truth, that labor has its most important rights 
in the accumulation from the past; that the present wage rate 
should be enormously increased by the addition of money 
earned by the labor of the past which supplies us with wealth 
without that wealth being earned by present labor. 

In modern complex distribution, depending upon capital 
and machinery, the title to any particular product of labor has 
been lost, and is mixed up with millions of dollars invested in 
machinery and buildings. This complexity of title is so great 
that God Himself will not undertake to unravel it, but intro- 
duces a system of natural laws constituting a science of value 
by which accounts are kept between labor and the value of its 
product. Of course socialists and other reformers believe they 
can tell God how this title is to be secured without the circu- 
lation of money, and how each laborer may get the exact thing 
he produces, but the laws of nature do not change on so slight a 
pretext. 

The title of labor has been changed, from having a claim 
upon anything it may produce, to having a claim upon the 
value of everything offered for sale in the market at its market 
price. This is the point writers on labor subjects fail to 
appreciate. 

There is a great difference between the claims of labor 



62 SCIENCE OF VALUE 

upon capital and its claims upon goods, on account of the dif- 
ference in time given such claims to be settled by the circulation 
of two distinct quantities of money, one money carrying the 
claims of labor upon goods and the other carrying the claims of 
labor upon capital. Labor loses its claim upon capital by being 
deprived of the money by which the value of capital is dis- 
tributed, and not on account of any money being paid as in- 
come upon this capital. 

The great cities of the world contain about one-half its 
total wealth, and a very large share of the wealth outside these 
cities depends upon the markets they create by the density of 
consumers within them. The growth of capital is limited to 
a very insignificant part of the earth's surface, while goods are 
being sent to city markets from all over the world. The grow- 
ing demands from a progressive population, call for increasing 
quantities and varieties of goods which has a tendency to scatter 
the whole people over the entire surface of the earth seeking new 
objects to create new appetites in multitudes of buyers. But 
the necessity for distributing an ever increasing quantity makes 
it equally necessary that labor not engaged in sending commodi- 
ties to market shall concentrate in cities where as much time and 
space may be saved in distributing goods as has been lost in 
scattering population all over the surface of the earth in pro- 
ducing goods. 

No one doubts but labor has some kind of a claim upon the 
capital it creates, and upon the accumulation from the past, 
for to deny to labor a claim upon inherited wealth is to deny it 
any claim upon civilization in which it is compelled to live, for 
our civilization is based upon its accumulated wealth. 

We may discover the claim of labor upon capital by first 
inquiring into the claim of capital upon labor, which no one 
denies, while many are uncertain about labor having an equal 
counter-claim against capital. 

The claim of capital upon labor is that it supplies labor 
with its railroads, factories, machinery and all other forms of 



CAPITAL 68 

fixed wealth which greatly mcreases the quantity of supplies 
and which it need not produce, having this capital as an in- 
heritance from the past. Labor of course has the apparent 
power of escaping this claim of capital by being able to produce 
its own and not being required to use the capital from the past, 
but as this would take an enormous amount of labor from other 
pursuits it is much cheaper to pay this claim in dividends and 
in interest on money. 

To get at this question by way of illustration let us take 
the new subways now building in the city of New York as an 
example of new capital being created, and discover the rights of 
both capital and labor in this instance. The money to pay for 
labor and material in building the subway is presumably obtained 
by issuing securities and selling them to the public for invest- 
ment. Bonds really carry the cost, which are made payable in 
the distant future. But that these bonds or the money they 
supply pays this cost is only a presumption. The securities 
simply postpone a final settlement with labor to some future 
time. The actual labor and material is consumed every day 
and is settled for in a cash market every day, and some one must 
lose for the time being this advance of labor and capital which 
can only be restored in the future, and labor loses. The settle- 
ment for the cost of the subway each and every day is made in a 
cash market by labor in spending the wages paid for this con- 
struction, by this extra money so increasing the selling price of 
goods as to carry the cost of this subway in higher prices. The 
owner of the bonds supplied the money from bank deposits and, 
to get bank deposits into circulation, it is necessary to sell securi- 
ties in this way. The claim of the security owner rests upon 
the fact that his credit in the bank was convertible into cash on 
demand, and he surrendered this demand on cash for a security, 
which was the correct way to bring about the required elasticity 
of the currency. 

It is falsely presumed, however, that because the bonds 
are payable in a distant future that posterity in some way is 



64 SCIENCE OF VALUE 

saddled with this cost for the benefit of the present generation. 
This false claim would not appear if we had the necessary money 
in use, making these securities payable on demand in a cash 
market. 

There is no such thing as making the future pay for what is 
being consumed today. We cannot eat the eggs that are to be 
laid tomorrow. If we could make the future pay for the things 
we now buy we would not pay for anything but would saddle 
all property expenses on our great grand children. What we 
put off to the future is the claims of labor upon the whole subway 
which they must complete and pay for in higher prices of goods, 
and which they can only get the benefit of by selling it to them- 
selves in the higher wages it brings, but only selling it as fast as 
it is being reproduced. 

In spending tens of millions of dollars for the subway, that 
must all be completed before any of it can be used, and which 
will not be consumed until forty or more years, this accumulation 
of wealth for the benefit of the future is charged up to labor and 
paid for in cash every day, making an equal exchange between 
the laborers who produce the goods these builders consume, and 
an equal value of subway they produce. 

Capital has its claim secured to it by law. It must get the 
interest on its money from the earnings, and it is supposed to 
have a market where it may sell its bonds when it wants the 
money instead of the interest upon it. But the claim of labor 
in some strange manner is never paid, the money labor has 
advanced, equally with the owner of the security, never in- 
creases its wages. The subway, newly built and put into 
operation, will be partly consumed each 'year, and will have 
this part restored each year. The money representing its 
income is supposed to equal the sum spent each year in restoring 
the entire system for that year. Where then will the money 
come from to pay for the new subway that is constantly 
replacing the old and will entirely replace its value in about fif- 
teen years? Who will buy securities representing the replaced 



CAPITAL 65 

subway, labor is building over again? The owner of a bank 
deposit will not surrender it for security unless he can get his 
money back and the rate of interest it calls for. If this rate is 
five per cent it means that in twenty years he gets two subways, 
or the value of two, and it also means that in the same time 
labor should have received a surplus in wages so it would be the 
buyer in the resale of securities by the time it was rebuilt . But 
how is this increase in wages to take place? If the owner of the 
security is to get twice his money back he must pay twice the 
cost of the subway in buying securities. There will be twice as 
many securities in value as the cost, and in buying at this profit 
he is expected to put as much money out as will pay the cost and 
its interest. 

When labor has built and completed the subway it has 
made provision for twenty years in the future, and as it is only 
required to replace one-twentieth each year it has nineteen- 
twentieth to its credit. This credit is expected to take up the 
extra money spent in buying extra securities and keep it in con- 
stant use by paying higher wages. The increase in wages to labor, 
must come from some benefit from the subway, that not only 
pays its income, but the subway must make a demand for labor 
in building that will keep the labor market at a point where 
wages will include the claims it has upon the capital it has 
created. Beside the benefit of the subway from rapid transit, 
from the time it saves which should be turned into the money, 
it secures a great additional benefit by opening great spaces in 
outlying territory to be inclosed by thousands of new buildings. 
This building demand is expected to increase wages to include 
some of the subway money. In addition to the outlying dis- 
tricts the central parts of the city will also feel the new impetus 
to build because of the great increase in number of consumers, 
rapid transit will concentrate there. This outside building 
takes place and calls for new expenditures of millions, there 
being no doubt that the increase in rent will provide the new 



66 SCIENCE OF VALUE 

building with the required income which will support twice the 
cost of each building. 

The credit labor created in paying cash for building the 
subway will now appear as ready money by allowing the owners 
of land to rake off all this credit by an advance in land values. 
The money taken off as an advance in price of land provides the 
credit for new building which labor again cancels in buying 
goods at twice the cost, and is thus forced to earn this money 
the second time in the present cash market instead of getting 
credit for having once advanced the money in the subway. 

But these buildings also create an additional credit for 
labor as they will not be consumed before fifteen years, and 
pile up a fourteen year surplus that should again advance wages, 
but the debts upon the land will then prevent this credit going 
to labor. Not having any credit in circulation to offset the 
securities outstanding for the subway, and wages having failed 
to advance on account of the advance in land value, the owner 
of the security is required to take bonds for half the total value 
because no money to pay cash for securities can come into cir- 
culation when the wage rate is held to its lowest level by the 
rise in value of land. 

The great fact to attract most attention in the modern city 
is the building sky-line, the high and expensive buildings in the 
business districts diminishing in value and importance as the 
city spreads toward its outer boundaries. In this central dis- 
trict one narrow cliff -like building will rise in solitary grandeur 
out of a block surrounded by numbers of miserable decadent 
structures belonging to prehistoric times. 

We should have no difficulty in realizing that the miserable 
land lines which maintain building abortions in all cities, should 
not be tolerated in a civilized community. In the main part of 
each great city, and in many other parts each block should con- 
tain but one building having light and air for both building and 
the surrounding streets. Each block should have upon it, the 
building the public needs and the building it is now paying rent 



CAPITAL 67 

for on account of the location, but paying for disgraceful and 
decadent structures long since outgrown. Each block should 
have the great building that tipifies the great city and satisfies 
public demand for the space. It should have room for imposing 
approaches, and rise to imposing heights in terraced stories, 
instead of rising like cliffs from a desert of ruins. What law of 
capital development governs this sky-line that we should be 
willing to spend untold millions on some acres in a city and on 
other acres not far away spend only thousands, or only hundreds 
of dollars? Why is Manhattan Island so thickly populated and 
built upon while the lands across narrow rivers that appear to be 
as favorably located will not attract the same amount of capital, 
and in most cases will not be built upon altho the land may be 
had without cost? 

Money will not be invested in building for the future unless 
the money will be returned in that future and the regular rate of 
interest being paid for the time of waiting on its return. Unless 
a building may be rented for as much each year as will return 
twice the cost of the building by the time it is consumed — this 
time is measured in the rate of interest — it will not be built 
unless a man makes a mistake in his judgment. This return of 
money from rent is governed by the rate of interest, every 
building being supposed to collect twice its cost by the time the 
rate of interest would double the principal. In this case the 
investment would be governed by the annual rent, and this 
annual rent would fix the value of the building at each location. 
Where the annual rent will return three thousand dollars a year 
the building would cost about ten times this sum and sell for 
twice its cost. If the annual rent was thirty thousand dollars a 
year a building would be built at that location costing about ten 
times this sum— three hundred thousand dollars— and sell for 
six hundred thousand. 

If man must rebuild before fifteen years and if a new build- 
ing returns no greater rent he loses on account of having a poor 
building, but if his building will last more than fifteen years he 



68 SCIENCE OF VALUE 

gains from the better construction, and on account of this gain 
we will have more space in great buildings than the present 
demand because the future gain will be taken into consideration. 
If a man has an old building costing but ten thousand dollars 
and finds an increase in business will allow him to include much 
more space by a taller and better structure, he can afford to tear 
down a building at any time costing but ten thousand dollars 
and selling for twenty, and build a new one costing a hundred 
thousand and selling for two hundred thousand. 



CHAPTER XI 
BANKING 

THE benefits to be derived from a cash market are not 
likely to encounter much opposition from the public 
which may easily understand what it will accomplish 
and how it will remedy existing evils without disturbing business 
conditions. The plan is so simple that a child almost can see 
the benefits to be derived from the greatly increased business 
done on a cash basis, and any business man need not think twice 
to realize the benefit to him of a market in which he can sell 
without loss and with certain profit for cash on demand. Altho 
the plan to secure a cash market is very simple, and altho the 
benefits of the plan are obvious, the underlying natural laws by 
which this circulation of cash and elasticity of credit is governed, 
are far from being simple, and so called experts will endeavor to 
confuse the issue on this account. 

Introducing a new financial plan is like introducing a new 
traffic system in a city to replace the old horse cars, which 
contained many technical and engineering problems connected 
with electric traction, as well as difficult financing problems. 
The public had no real concern about technical questions, it 
only asked how much more comfortably it might travel, how 
much faster, and if the expense would be increased? We could 
never depend upon educating the public concerning technical 
problems of electricity or finance in a street railway system, and 
expect to vote upon it, and the same is true concerning a cash 
market. The public will only ask about its benefits and its 
expenses. 

But we have a class of experts who sit in judgment on every 
new adventure of the public and they will want to be shown the 

69 



70 SCIENCE OF VALUE 

ground upon which a new system bases its claim of benefiting 
the great mass of laborers. We have also a great and powerful 
class who are being benefited by the prevailing injustice of dis- 
tribution, who may be expected to oppose any plan by which 
their power for evil will be interfered with, altho in the end they 
may also benefit. 

The chief opposition may come from the great banking 
institutions, and financial syndicates behind such banks, who 
have been the chief beneficiaries of the wrongs from which the 
whole people suffer. They possess a hold upon the liquid credit, 
arid cash of the country, which they will not lightly relinquish. 

A simple example will illustrate the cash market plan, and 
the connection it has with the banking system. The city of- 
St. Paul, Minn., in June, 1913, found itself embarrassed for the 
need of about forty thousand dollars to meet city payrolls, and 
in need of more than a million dollars to pay for water works 
•extension under contract. The bankers of that city said they 
could not supply any of this money at that time, as there was no 
market for municipal securities at the rate of interest the city 
was willing to pay. The city then decided to compete with 
banks on equal terms for money on deposit convertible into 
cash, and they proceeded to issue and sell city securities over 
the counter, as it is called, in small denominations to retail cus- 
tomers in place of wholesale to banks. There was nothing 
original about the plan to sell at retail as that had been tried 
many times with little success by other cities, but the city of 
St. Paul made a departure from the ordinary bond by making 
the issue, principal and interest, payable on demand without 
notice, and in this way gave the public better terms for its 
money on deposit than the banks could give. The bonds were 
in denominations as low as ten dollars at four per cent, and a 
man having ten dollars surplus could buy a certificate of credit 
on the city of St. Paul and use it the same as tho it was in cash. 
Its small income would allow it to circulate more freely than 
cash in that local field. The plan was a phenominal success and 



BANKING 71 

more than three million dollars of the city debt was funded into 
these new certificates payable on demand giving the additional 
advantage of having that credit liquid, and allowing it to do the 
work of cash in that city. 

The cash market is merely an extension of this St. Paul 
plan to cover all capital securities and all mortgages of the 
country, and it would be of the same advantage to each corpor- 
ation as it was to the city of St. Paul in escaping the power of 
the banking interest, and escaping their control over the cash 
and credit of the country. 

Testimony taken by Congress shows that practically all the 
best paying income property in the United States, its great 
railway systems, and its great combination of industries, have 
within a few years come under the ownership and control of 
great banks and the families of a few very rich who own and 
control these banks. This control over capital arises from the 
fact that capital must have a money market in which its 
securities may be sold as well as a market for the sale of 
its products among the people, and it is this financial market 
that theorists and writers on public questions seem wilfully to 
overlook. 

A man invests in securities, to secure the benefit of the 
income, having no insistent need for his money, and counts it 
as a surplus, for which reason he puts it in a bank until it grows 
to a point where he invests it. The bank agrees to pay this 
deposit in money on demand hence it gets all the surplus credit 
that is not in immediate use. A man who fears he may need 
his money in the future wants it when he wants it, and the bank 
promises to pay him when he demands payment. 

If capital is to be on equal terms with banks in seeking 
money to invest in its securities, and not be at the mercy of 
banks, it must also be able to say to the depositor that he may 
have his investment returned to him on demand, not only say 
it, but insure such paym.ents by having the required reserve in 
the hands of a creditable trustee. This should make it clear 



72 SCIENCE OF VALUE 

why capital has concentrated to banking control when their 
control over money enables them absolutely to dictate the terms 
upon which every investment as great as a million dollars must 
be made'. On this account the banker has come to represent a 
double personality, a Dr. Jekyl and a Mr. Hyde. As a banker 
he is anxious to secure the greatest possible line of deposits upon 
which his power is based, and therefore encourages laws looking 
to that end, which make depositors confident that their money 
is safe in his keeping. But as a financier who is interested in 
unloading securities on the public from which he makes billions 
of dollars in profit his interest is just the opposite. In such 
case he has no desire to make capital secure, or to make the 
money safe after it leaves his bank. The more the depositor 
loses the greater he appears to become in their eyes as a banker. 
The law protects the depositors' money when it is in the bank, 
but the moment that same deposit leaves the bank and enters 
the treasury of any corporation it has no protection from law, 
but is exposed to all the bandits and looters of the country who 
may take it by raiding the securities of capital in the markets 
the banks control. The cash market will deprive the banks of 
ail this power over money. The depositor may invest his own 
money and be sure it is as well invested as any bank could do 
for him. 

We must remember, in this connection, that the banker and 
financier has been given thirteen billion dollars of idle bank 
deposits to play with in his game of high finance; that he con- 
trols this money, not once, but as many times as he can use it in 
creating bond and mortgage debts upon real estate, and when 
it is all tied up in debts that cannot be paid we come to the edge 
of the precipice of ruin in our business. This thirteen billion of 
idle bank deposits, the cash market would set into active cir- 
culation as higher wages, turning over as often as labor could 
receive and spend the money, and it would allow labor to buy 
the securities, billions of dollars' worth, that are now being 
juggled with by high finance. 



CHAPTER XII 
WAGES 

WHEN a rise in wages is being discussed the fact will 
appear tliat the cost of living must advance on this 
account, and the false conclusion follows that all 
advance in wages must be lost by an equal advance in the prices 
of things labor buys in order to live. While it is true that a 
general advance in the wages of the laborers who produce goods 
must advance the cost of such goods, it is not true that total 
wages are included in this cost. 

If no more money is paid to labor in wages fhan will buy 
its bare living then of course any increase in wages that must be 
spent in buying more of the same goods will advance the cost of 
living to exactly balance the gain in wages, but even in this case 
labor will gain fifty per cent because only half the total wages is 
included in cost of goods. But if wages advance far enough, 
and do not stop at the sum of money that will or must all be 
spent for a living, it will soon follow that for every dollar in 
wages there is a dollar of surplus above the cost of living. 

We must remember that any increase in wages only re- 
quires half the money to be included in higher cost of goods, 
because only half the labor is so employed, half the product of 
this half of labor is material consumed by capital, so that only 
one-fourth of higher wages should be taken up in higher living 
cost. Hence it follows that if wages were to rise from the 
present minimum to the maximum and were to include all the 
money the whole product sells for, from capital sent to market 
each year as well as from goods, any rise in prices of goods the 
people consume could take no more than one-fourth of the 
increase in wages. 

73 



74 SCIENCE OF VALUE 

Every one admits, without argument, that the market 
price must be more than cost, goods will not be assembled in the 
market unless they will sell for a profit in money, no one seems 
to know just where this money profit comes from, nor seems to 
realize that it must come from wages, by being first included in 
wages; that profit is made in buying goods and selling them back 
to labor at more than labor was paid to produce them. If labor 
must become the only real buyer in a cash market, not only 
buying back the goods consumed in the living of the people, but 
must buy back capital as an investment for its surplus wages. 
If labor is to get all the money in wages that buys all its products 
in every market, how will any one get a profit? Must not every 
one become a laborer as the rich fear they may under a just 
system? Suppose we take everything we have to sell to a 
great market once a year where all the laborers of the country 
assemble with all the money they have received in wages for the 
same year. In this market will be found not only all manner of 
goods the people demand, but all the capital that has been 
produced the same year— houses, factories, office buildings, 
hotels, theaters, railways, electric appliances, machinery, 
improved streets, public buildings, Carnegie libraries and like 
capital. Suppose the total money received by all the laborers 
during the year buys all the things they have produced. The 
money paid to labor during the year we will suppose buys every- 
thing in this market at a profitable price. The wages of labor, 
which was not a part of the cost, making up the profit money, 
and when the year's business had been balanced the capitalist, 
manufacturer and merchant will find they have some billions of 
dollars of profit to their credit, altho all the goods had been sold 
back to labor. How can such things be? This sum of money 
left over makes it appear that there is more money in the buying 
market than there are things to be sold for that money, and if 
we could limit the buying market to the things produced in any 
year this would be true, but the market has no such limit. 

At the beginning of any year there is on hand in the United 



WAGES 75 

States about one hundred and fifty billion dollars' worth of 
wealth accumulated from the past, and if no addition is made to 
this wealth during the year and if all the year's production is 
consumed ; ten billion dollars of profit money may be gained in 
distributing the annual product. This means that ten billion 
of inherited wealth must be added to the total market and 
increase the total sales of that market by a change in the 
distribution of such wealth by which new owners for ten billion 
dollars' worth of it will be created. 

When we remember that half the total number of laborers 
not only produce all the goods that all the. people consume, but 
also produce all the material that goes into the construction of 
capital, it should be clear that the wages of this half would 
naturallj'' consist of the money received from the sale of its own 
product; that the wages of the other half would as naturally 
consist of the money received from the sale of an equal value of 
capital in the same market. 

Primary labor, which produces all the goods the people 
consume and all the material capital consumes, will not buy 
back for its own consumption but one-fourth of its own product. 
The whole mystery of the wage question will be found in this 
fact that one-half the total labor which produces all the con- 
sumable goods can only consume one-quarter of its own pro- 
duction, and the question arises: Shall the rate of wages paid to 
this labor consist only of the money received in the market for 
one-fourth of its product, or shall it receive the money as a 
surplus from the sale of the other three-fourths? If the rate of 
wages for primary labor is only one-fourth, measured in its 
own products, the other fourth would then be sold to secure 
money to pay the other half engaged in secondary occu- 
pations who produce none of the goods they consume .and the 
remaining two-fourths consumed by capital would be sold to 
supply the money paying for capital at its cost. Secondary 
labor must be supplied with goods upon which to live and cannot 
be so supplied unless such goods advance in price so as to include 



76 SCIENCE OF VALUE 

all the money labor spends for them, and for this reason the 
selling price becomes twice the cost. 

Now coming back to the primary laborers, who produce all 
the goods, we discover they must buy the one-fourth they con- 
sume at twice the cost and will be paid a rate of wages which 
will allow this buying of one-fourth at twice the cost. This 
plan seems to be a robbery of this labor by a mere advance in 
price but if this same labor received the money for the other 
three-fourths, selling at the same advance, it would find its 
wages growing as prices advanced. This is to say, for example, 
if a certain unit of consumable goods cost two dollars in primary 
wages and sold for four dollars at twice this cost, and this labor 
need only use one-fourth, it need only spend one dollar of the 
two in the market, and have one dollar as surplus money. If 
the cost of this same unit of goods was then to double because 
wages had doubled, advancing to four dollars instead of two, 
and selling for eight dollars, the labor buying one-fourth of the 
eight dollar product would only spend two dollars out of four, 
and have two dollars in surplus money instead of one dollar, 
altho wages and prices had doubled. 

Thus we may see that if labor gets the benefit nature has 
provided, if the rate of wages is determined by selling three- 
fourths of the surplus as well as by only buying one-fourth of it, 
then the higher prices rise the higher will the money surplus 
rise above the advance. When, therefore, we discuss a rise in 
prices that will accompany a rise in wages we must remember 
the natural law would give to labor a surplus in money from 
this very advance in price growing out of the fact that the 
surplus it sells to others is greater than the supply it buys for 
its own consumption. But labor cannot get this surplus 
unless something else is sold besides commodities to make 
up the total sum of money to be divided among the total 
number of laborers. It ought not take a great amount of 
light from a new lamp to make it clear that we have two very 
great classes of labor as soon as we accumulate wealth in cities 



WAGES 77 

and divide the population between city and country. The pro- 
ducing class is the primary laborers, for without their product 
we would all starve. The distributing class is the secondary 
laborers, for unless they consumed the surplus, we would be little 
better than savages. It should be clear that the wages of each 
class should be derived from the money received from the sale 
of the product of each, primary labor having the total com- 
modity market to its credit and secondary labor having 
the equal capital market to supply the money it should have 
at a rate the primary market fixes for all labor. 

Minimum Wages 

The first condition imposed upon the body politic, by laws 
of value, is that all the people must be provided with subsistence 
at any cost, and for this reason the rate of wages must first 
provide for the distribution of this primary product, so that 
surplus labor may secure the food and other supplies upon 
which its life depends and upon which its labor is based. This 
primary or minimum wage rate depends upon the fact that all 
laborers spend about the same amount of money on about the 
same character of supplies, and as there are two such laborers 
who buy goods for only one laborer producing goods this excess 
in demand sends the price to twice the cost. 

Thus the sale of the goods, which is being consumed in the 
living of the people, may supply the only money they receive in 
wages, and all the material entering into the growth of capital 
and all value of labor in constructing capital may fail to supply 
a dollar to the wage fund. Thus we are forced to accept a 
minimum wage rate for labor long after the development of 
capital would have changed this rate to the maximum, and we 
proceed to pile up unearned wealth for the benefit of the rich as 
a class, thinking such a system is the only one in existence. We 
can increase this minimum by extending trade or by extending 
production from manufactured goods, but no matter how great 
may be the increase in quantity and variety of new goods, and 



78 SCIENCE OF VALUE 

how much wages may advance from this source we can not con- 
tinue in this line beyond the hmit debt will establish. Then we 
discover something is radically wrong with our financial system 
because we have a falling rate of wages in place of an advancing 
rate with increasing numbers always out of work, while the 
capacity to supply the people has been multiplying. 

The false theory concerning the rate of wages, which limits 
wages to the commodities the laborers directly consume, has 
given the world two distinct and equally false theories of trade 
and taxation. The theory of free trade was a theory of extend- 
ing the minimum market, adding to the total supplies in this 
way, and by adding to the manufacturing of a country. The 
theory of protection was identically the same but proposed to 
aid the manufacturing of a country by excluding such manu- 
factures as could be developed in the country itself. Each of 
these theories fail to assist labor for the reason that they only 
contemplate the minimum and neglect to take into consideration 
the penalties nature imposes on every nation refusing to allow 
the minimum to advance to the maximum as fast as wealth 
accumulates. 

Each country soon discovers that they each seek to find 
markets in other countries they should have at home, and seek 
to sell practically the same classes of goods to each other on a 
scale of constantly, descending prices with increasing difficulty 
in the labor markets of the world, making hard times world- 
wide which before were of a local character. 

The method by which each nation is seeking trade among 
the other nations is in violation of the very laws upon which 
trade is based, for they seek to concentrate all foreign trade to 
the nations who can sell at the lowest price, while trade should 
equalize differences in natural resources over the world. Natu- 
ral trade would increase wages and prices in all countries, and 
increase capital in all countries, the countries having natural 
advantages of climate, soil or mines would sell these products to 
other countries not so favored, and thus give them the same 



WAGES 79 

advantage as tho the mines or favorable forests or soil was on 
their own land. 

The difficulty in paying the maximum rate, and holding to 
the minimum comes from the fact that this minimum is paid by 
the primary quantity of money, and this money can pay no 
more than this rate, and when only this quantity of cash is 
allowed to circulate every employer is as helpless in his desire to 
advance wages as is the laborer. Unless credit money arising 
from profits in selling capital will advance wages as to include 
this profit it becomes impossible to get the money into use by 
which an advance in wages above the minimum can be paid. 
Out of every two dollars paid from the cash circulation in 
minimum wages one cash dollar must be used to cancel a 
dollar of credit by which capital is paid for in higher prices of 
goods, and labor gets the benefit of only one dollar out of 
every two in the cash circulation. 

The maximum rate demands that for every two dollars 
paid in cash, two additional dollars shall be added in credit 
money to pay prices of goods above cost, and that all this money 
from the sale of all the goods shall then determine the rate of 
wages for only half the total labor. The other half not engaged 
in producing the goods it consumes becomes a charge upon the 
selling price of capital which must supply four dollars in wages 
from credit money to balance the four dollars supplied to the 
primary laborers from the sale of commodities. Instead of 
labor in general getting but two dollars in cash and having one 
of them used to cancel a dollar of credit for the benefit of capital, 
each laborer would then receive two dollars in cash and six 
dollars in credit and four dollars of this credit would be returned 
to capital as profit money, the other two dollars in credit money 
would become a surplus in wages by which labor buys back the 
capital, the two dollars in cash buying back all the goods in the 
market. 

How is this much desired rise from the minimum to a maxi- 
mum, four times as great, to be secured? The rise from the 



80 SCIENCE OF VALUE 

minimum must depend upon capital being forced to assume the 
burden of paying for the labor which supplies capital to the 
market, and thus take from the minimum wage the burden it 
now carries, and allow primary labor to get the benefit from the 
sale of three times as much of its product as it consumes. 

But capital cannot take up this burden of paying for its own 
labor unless it is supplied with the money to do so, and it cannot 
be supplied with this money unless the money is being created 
during the time capital is being created. Capital must sell for 
twice its cost and by this profit above cost create a quantity of 
money that will all become a demand for labor, none of it be 
cancelled by the cost of land. This increasing demand for labor 
from building must come by having land to build upon at no 
cost, not only land in cities but the lands in the territory sweep- 
ing away from the city that should have been improved by 
small farms which alone will supply the required capital to the 
country which will balance the capital in the city. 

To have land without cost, and at the same time to be able 
to finance every building the public can pay rent for, by having 
a cash market, will quickly send wages to the maximum limit, 
and this being four times the present limit of ten dollars a week 
the increase of buildings to comfortably house forty million 
laborers getting four times the present wage rate will keep up 
the demand for labor indefinitely. 



Our City Civilization 

SECOND EDITION, REVISED 

Cloth— 250 Pages - Price, $1.50 

While this book is a revision of the first edition it is prac- 
tically a new book. The first edition had defects in almost 
every chapter owing to a failure on the part of the writer to 
explain clearly the complex movements of cash and credit in the 
distribution of wealth. 

The circulation of cash and credit money depends upon a 
rate of profit higher than the rate of interest, and some of the 
natural laws connected with profits and wages had not been 
fully worked out in the first edition. 

In this revision it is believed this trouble has been remedied, 
and the book has been greatly improved in all of its explanations 
of the problems of modern civilization. 



Inclosed please find one dollar and fifty cents for which 
send one copy " Our City Civilization, " Second Edition, 

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